Insurance Regulatory News, May 2021 # 2 | Hogan Lovells

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  • Civil Liability Act 2018 (Financial Conduct Authority) (Whiplash) Regulations 2021 Regulation
  • Insolvency regulations for insurers: HM Treasury advises on changes
  • Responsible openness in the insurance sector: PRA speech
  • BI Policyholder Claims Notices: FCA Update
  • Monitoring climate-related risks in the insurance sector: IAIS application paper

Civil Liability Act 2018 (Financial Conduct Authority) (Whiplash) Regulations 2021 Regulation

The regulations of the Civil Liability Act 2018 (Financial Conduct Authority) (Whiplash) 2021 (SI 2021/594) have been published together with an explanatory memorandum. The Regulations empower the UK Financial Regulator (FCA) to enforce the prohibition of preparing and soliciting offers to settle claims for whiplash in road traffic without a medical report, as set out in Sections 6 and 8 of the Civil Liability Act 2018.

The regulations apply in England and Wales and come into force on May 31, 2021.

In its latest edition of the Regulatory Summary, the FCA notes that the Whiplash Reform Program will be effective on the 31st. An informational and FAQ document is available. The FCA states that firms considering representing a claimant on the new official Injury Claims Service portal should ensure that they are not engaging in regulated activities without proper permits. You must also carefully review the legislation and the FCA manual. The FCA encourages companies unsure of their position to seek independent legal advice.

Insolvency regulations for insurers: HM Treasury advises on changes

HM Treasury is advising on proposed changes to insolvency regimes for insurers under the Financial Services and Markets Act 2000 (FSMA). It states that the government, in partnership with the Bank of England, the Prudential Regulation Authority (PRA) and the FCA, has identified areas where reforms can make UK bankruptcy regimes more robust for insurers to better protect policyholders and costs to lower for industry and the wider financial sector. The government is therefore proposing a number of targeted changes to the current insolvency regime for insurers to enable the UK authorities to manage insurance crises in an orderly manner.

The suggestions include:

  • Enhancements to the Court’s existing powers under Section 377 of the FSMA to order a reduction (“write-off”) in the value of an insurer’s contracts;
  • the creation of a new court-appointed “depreciation administrator” to monitor and carry out a court-ordered depreciation in accordance with amended Section 377;
  • the introduction of a moratorium on the termination or suspension of financial and service contracts upon application to the court for (and, if applicable, during) administration, write-offs pursuant to Section 377 or liquidation;
  • only in the case of life insurance contracts, a suspension of the policyholder’s claims for surrender upon application to the court (and possibly during) an administration, write-down according to section 377 or liquidation; and
  • a change in how the Financial Services Compensation Scheme (FSCS) operates in the event of a Section 377 write-off to ensure that protected policyholders are not financially inferior.

The deadline for replying to the paper is August 13, 2021.

Responsible openness in the insurance sector: PRA speech

PRA published a speech by Anna Sweeney, Executive Director of PRA, Insurance, on responsible openness in the insurance sector. In her speech, Ms Sweeney spoke about how the PRA will regulate insurance services after the UK leaves the EU, facilitate competition and the UK’s role in setting international standards on issues such as climate change.

BI Policyholder Claims Notices: FCA Update

In its latest edition of the Regulatory Summary, the FCA includes an update for insurers and intermediaries on notices of policyholder claims related to the Business Interruption Insurance (BI) Test Case.

The FCA notes that, in accordance with their Business Interruption Insurance Test Case: Finalized Corporate Guidelines, insurers should inform all policyholders with potentially affected claims or complaints after the test case is completed. The FCA stipulates that insurance intermediaries who act for policyholders should try to support them, if necessary, in order to process their claims with their insurer quickly. You should also consider whether it is fair and in the policyholder’s best interests to notify the policyholder if the intermediary reasonably believes that they may have a claim under their policy. This applies regardless of a separate business relationship between the agent and the insurer.

Monitoring climate-related risks in the insurance sector: IAIS application paper

The International Association of Insurance Supervisors (IAIS) has published an application paper on overseeing climate-related risks in the insurance sector. The paper is intended to assist regulators in their work to integrate climate risk considerations into oversight of the insurance sector. It provides recommendations and examples of good practice consistent with the IAIS Core Principles for Insurance.

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