Insurance Supervisory Approach January 2018 09 February 2018 1 - - PowerPoint PPT Presentation
Insurance Supervisory Approach January 2018 09 February 2018 1 Welcome and Introduction Evolution of our supervisory approach under Solvency II Providing clarity on our key areas of focus Setting expectations for the next 18-24
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09 February 2018
January 2018
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Insurance Regulatory Approach for the next 18-24 months Q&A on Insurance Regulatory Approach Insurance Distribution Directive Q&A on Insurance Distribution Directive
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Authorisations Supervision (Prudential and Conduct) Enforcement
Insurance Regulatory and Supervisory Plan
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Governance Underwriting Systems and data Reserving Investments Reinsurance Group Contagion Capital/SCR Reporting Quality Assurance Performance
Performance
Resolvability & Recovery plans Conduct
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Corporate Governance
Business model
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make revenue
stressed situations
(UW, claims, etc.)
sense for the entity to set up in Gibraltar?
they want to access?
assessments
assessments
additional funding in stressed situations
management policies
Access to Capital Governance Adequacy
model Rationale for setting up in Gibraltar
Prudential Team
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IST Team BAU Team Super REAL’s with
Meetings Letters Regulatory Intervention Enforcement Exchange of information with
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BAU QRTs Financial Statements ORSA Reserve reports Technical leads will focus on risk areas Focus areas will intersect with BAU work
Focus areas for 2018-2019
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Policyholder Protection
IDD Implement
Delegated Authorities Product Oversight and
Governance
Complaints
Outsourcing
Claims Handling
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Independent Reserving Reports Actuarial reconciliations Actuarial Function Holder Reports Board / Committee minutes
Expectations:
and documented, and with express consent of the Board)
mitigating limitations
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Underwriting
framework Monitoring Forward looking plans
events (e.g. Ogden rate)
underwriting framework
competitors, distributors, service providers
assumptions, ORSA) vs prior year loss ratios
any improvements
Prioritise prudential resource towards firms:
Identification supported by peer comparisons, market benchmarks, collaboration with other regulators
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Own Risk and Solvency Assessment (ORSA) Reviews
Discussions of potential capital add-on proceedings where standard formula is not appropriate
Solvency II Approvals and ongoing appropriateness reviews for:
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Risk and areas of focus
Key risks identified to date: How GFSC will approach:
RPTs Strip out profits Going concern Lack of visibility Outsourcing controls Governance Peer group analysis Review of controls Prudent Person Principle Impairment reviews Business model analysis Quarterly reporting
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Recovery and resolution plans
resolvability.
What are indicators of a stress scenario What are procedures for informing Board What contingency plans are in place
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Expectations
purposes:
data sources
distributors and COB
Risk indicators from….
Auditor’s Management Letters Financial Statements
Reserving reports – Uncertainty comments
Actuarial Function Holder Reports Assessment of Data Quality
Internal Audit Reports Regulatory reporting quality
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Risk and areas of focus
Key risk identified to date:
SII Prudent Person Principle
Group debtors Group investments Property investments Liquidity and concentration concerns from:
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Quota share Excess of Loss (XoL) ADC/LPT Covers Co-insurance
Review ORSAs and underlying contracts: Focus on insurers where:
Reinsurance may just be a very expensive form of capital
minimum and deposit premiums
limits on contracts
commutation clauses, and appropriateness of SCR modelling
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Ongoing work ORSAs Financial Statements Reserving Reports QRT analysis
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Auditors Actuaries Work performed is critical in supporting regulatory oversight Expect firms to follow ISAs and industry best practice Should appropriately consider work of experts Will be considered in our QA visits Work performed is critical in supporting regulatory oversight We will consider quality of reports to licensees We will coordinate with governing bodies We will consider application of standards
Collaborative approach
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January 2018
given its reliance on cross border activity
fully compliant by 1st October 2018
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Key Features of the IDD Conduct of Business Product oversight and governance
Knowledge and Competence Enforcement powers Passporting Supervisory strategy Next Steps Questions?
Greater transparency (price and costs) Better and more comprehensible information (IPID) Cross-selling Transparency & business conduct All distribution channels caught Stronger safeguards (investment products suitability) Fair competition
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Advising Proposing Carrying out preparatory work to contracts Concluding such contracts Assisting in administration and performance of such contracts
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Corporate Governance Host state regulator rules Compliance by 1st October
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In terms of Conduct of Business requirements, IDD seeks to:
Improve regulation in the retail insurance market Strengthen consumer protection, in particular with regard to the distribution of insurance-based investment products.
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Insurance distributers must "always act honestly, fairly and professionally in accordance with the best interests of customers All information must be "fair, clear and not misleading."
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COB Requirements
Product Oversight & Governance
Advice
Cross Selling Insurance Product Information Document
(IPID)
Conflicts of interest &
Transparency
Enhanced
Requirements
for IBIPs
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Recital 55
Member States where insurance intermediaries manufacture insurance products for sale to customers, insurance intermediaries should maintain, operate and review a process for the approval of each insurance product”
Article 25
shall maintain, operate and review a process for the approval of each insurance product, or significant adaptations of an existing insurance product, before it is marketed or distributed to customers.”
Regulations
they have a decision-making role in designing and developing an insurance product for the market.”
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insurer and the intermediary can act as co-manufacturers:
‒ Separate out responsibility between each party ‒ Contractual arrangements ‒ Knowledge sharing
distribution, you need to have controls in place to ensure you understand the product and its target market.
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Product Testing Product Approval Process Management Involvement Appropriateness
channels Product monitoring and review Target Market
New processes Updating internal policies and processes Training within the organisation Embedding of the processes Training of distributors New contractual arrangements
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Sets high standard – based on a benchmark Appropriate in relation to the products offered Continuing Professional and development requirements Onus on Firms to ensure staff meet standards and support staff
Establish a high standard Qualifications; examples from industry Firms need to assess all individuals currently selling or in relevant management position Firms need to establish if other qualifications meet this benchmark
Listening in on discussions with clients Peer review of advice Providing support and time for studies Providing a robust induction and training programme Usually 6 months to be competent dependent on products
15 hours minimum CPD Structured training covering areas in Annex I Covers products offered by firm Understand firm’s internal policies Keep up to date with market and industry developments Firms need to document staff CPD and ensure compliance
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Administrative sanctions and other measures shall be effective, proportionate and dissuasive
Order the entity or individual to cease any conduct which constitutes a breach and desist from any repetition of the conduct Power to revoke the licence For investment based insurance products there are further powers:
profits gained from non-compliant activity
The directive requires us to take all measures necessary to ensure that the provisions are implemented Administrative sanctions may be imposed for all infringements of the provisions within the directive and local regulations
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Firms can passport across the EU to carry out the activity of insurance distribution Insurance companies need to ensure that firms distributing their products are registered to carry out the activities of insurance distribution in the member state in which they operate There is an obligation for firms and individuals to comply not only with the local requirements, but also with the host state requirements which can differ from jurisdiction to jurisdiction
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If breach occurs –GFSC Obligation to consider any action
If host member state considers that despite any action taken by GFSC consumers are detrimentally impacted or our actions are in their view insufficient – it can take separate action to prevent further irregularities
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‒ With industry ‒ Within the GFSC ‒ With host state regulators
‒ Implementation plans by firms ‒ Product oversight and governance ‒ Transparency
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Currently
IDD Workshops
31 March 2018
30 June 2018
September 2018
good) requirements or have action plans in place. 09 February 2018 52
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