THE LEGAL (AND REGULATORY) HORIZON JOHN GILBERT M & G ADVISORY - - PowerPoint PPT Presentation

THE LEGAL (AND REGULATORY) HORIZON JOHN GILBERT

M&G ADVISORY SERVICES HOGAN LOVELLS

TOPICS

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• Corporate Governance
• TCF for closed book policyholders
• PRIIPs
• Mutual Deferred Shares
• New reporting requirements for non-SII firms
• Insurance Distribution Directive

CORPORATE GOVERNANCE

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Board Responsibilities

• PRA Supervisory Statement SS 5/16, March 2016
• Largely reinforces UK Corporate Governance Code
• collective responsibility; clear delegation
• NED knowledge and sector experience
• NEDs should seek external advice where appropriate

Member Engagement

• Increased focus for regulators
• Threat of demutualisation

Actions for NEDs:

• Ensure board has necessary skills and

experience and is aware of responsibilities

• Focus on member engagement

TCF OF CLOSED-BOOK POLICYHOLDERS

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• FCA Thematic Review reported in March 2016 (TR16/2)
• Consultation on proposed guidance closes June 2016
• Mixed picture of (mostly) good but (sometimes) poor practice
• Areas of criticism:
• reliance on contractual terms “might not necessarily ensure a fair outcome”
• frequency and quality of policyholder communications
• fee structures
• lack of board focus

Actions for NEDs: Read TR16/2 Question executive on treatment of long- standing customers Consider whether board gets adequate MI

PRIIPS

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• Stands for “Packaged Retail Investment and Insurance-based Products”
• Applies to most life products including with-profits and Holloway (despite Holloway

exemptions from COBS20 and RDR)

• EU Regulation of November 2014 to be implemented by 31 December 2016
• Proposed Regulatory Technical Standards published April 2016; FCA to consult on

implementation in UK

• Key Investor Information Documents to be replaced by Key Investor Documents in

standard form for all affected products throughout EU

• Insurance Europe:
• critical of short timescale for implementation
• believe standard information discriminates against insurance based products

Actions for NEDs: Question executive on n preparedness for issuing KIDS

MUTUAL DEFERRED SHARES

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• Mutuals’ Deferred Shares Act passed in 2015
• Consultation on regulations awaited from Treasury
• Creates new instrument by which mutual insurers can raise Tier 1

capital while protecting mutual status

• Costs of issue of listed securities likely to limit appeal to larger

mutuals

• Nevertheless, opportunities for smaller mutuals: private placements,

new product lines, Islamic insurance?

Actions for NEDs: Consider whether MDS is an opportunity for your Society Respond to Treasury consultation

NEW REPORTING REQUIREMENTS

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• PRA Consultation Paper CP18/16 published May 2016
• Applies only to non-Solvency II firms
• Proposes
• Deletion of IPRU(FSOC)
• Simplified 3-yearly FSC2 returns for registered and incorporated

societies on a single cycle starting at 2017 year-end

• Abolition of FSC1 and FSC3 returns
• Retention of annual FSC 4 certificate

Actions for NEDs: If a non-SII firm, watch for PS to implement the proposals Ensure executive is up-to-speed with changes

INSURANCE DISTRIBUTION DIRECTIVE

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• Follows IMD1 in 2002
• IMD1 already “gold-plated” in UK
• but applied only to “pure” intermediaries
• IMD2 morphs in IDD
• covers all channels of distribution
• must be transposed by national regulators by February 2018
• requirement to act “honestly, fairly and professionally” and to act in “best

interest” of customer

• FCA consultation expected late 2016/early 2017

Actions for NEDs: Keep a watching brief for the time being

John Gilbert Hogan Lovells john.gilbert@hoganlovells.com www.hoganlovells.com 077 6838 2086 M&G Advisory Services john.gilbert@mgadvisory.co.uk www.mgadvisory.co.uk

CONTACT DETAILS

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