Holman Fenwick Willan

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  • About hfw

    Through our integrated global network of 14 offices, HFW offers a comprehensive range of dispute resolution and transactional legal services to the insurance sector, including insurance and reinsurance companies, policyholders, captives, brokers, managing agencies, TPAs and service providers. Our insurance and reinsurance work is high-value, likely to be complex and multi-party, and often international in nature.

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hfw Videos

  • INSURANCE BROKER KNOWLEDGE: Ownership of renewal rights

    Graham Denny, Senior Associate, Holman Fenwick Willan shares some insight into the often highly contentious issue of 'Ownership of Renewal Rights' click here for more
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    WHY PRIVATE COMPANIES SHOULD CONSIDER D&O PROTECTION

    Hello. My name is John Barlow and I am a partner at the law firm, Holman Fenwick Willan.

    The likelihood of a director or officer of a private company finding him or herself in court has increased significantly over recent years. I am going to take a few moments to consider a number of factors which have given rise to this state of affairs as well as a simple step which directors and officers can take to protect their personal assets, their investment in the company (which is often connected with their personal assets for example, by way of security for business loans) and the company itself.

    1. In this litigious environment, directors and officers of any company are still targets and whether the claims brought against them are appropriate or not, often significant legal fees are incurred (particularly where the nature of the claim involves highly technical regulations, for example, health and safety breaches or regulatory claims).  This is further complicated by the rather unclear nature of directors' duties which has been introduced by section 172 of the Companies Act 2006 (the duty to promote the success of the company).  For example, directors have to think about the interests of employees, the impact of the company's operations on the community and the environment and maintaining high standards of business conduct.

    2. The role of a director and his/her part in the decision making process in a private SME company is often better defined and identifiable than a directors' role in a PLC (indeed one only has to look at criminal prosecutions brought against large companies for events which have resulted in loss of life and the inability of the prosecution to identify particular directors who were responsible for the loss of life) - "pinning the blame" on directors of private companies is likely to be easier – there are fewer directors and the lines of responsibility are shortened.  Put simply, they cannot hide behind the hard/dotted reported lines which are found in large PLCs.

    3. Where private companies are concerned, often a director's personal assets are part of the security of the business or are charged to the lenders.  Clearly, if a director's significant assets (such as his family home) are pledged to his funders then he has no liquid assets available to fund litigation. 

    4. So what is the simple step?  Over the years insurers have expanded their  directors and officers offerings (from the traditional wrongful act, negligent activities). Coverage is now given for extradition, corporate manslaughter, employer practices liability (in other words sex or race discrimination), public relations and a broader form of outside directorship liability cover (and some standalone covers will cover directors for other activities which go beyond the realms of simply being a director of a private company, for example, trustees or governors). One only has to consider the long arm jurisdiction of the United States when seeking to extradite individuals residing in the United Kingdom to see how such cover maps into current risks.

    Finally, insurers are moving away from the classic means of indemnifying directors and companies (either in relation to what are called Side A covers which directly pay the director's defence costs and awards (and more often than not there is no deductible) or Side B covers which reimburse the company where they have indemnified the directors).  Given the size of private companies (in other words, SMEs) a director's reliance on a company indemnity may be misplaced and therefore a simple form of cover which indemnifies the director without any deductible is likely to provide the most comfort.

    Thank you for watching. If you would like to know more, please get in touch.

    END

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    YOUTALK-INSURANCE VIDEO TRANSCRIPT - INSURANCE BROKER KNOWLEDGE

    Holman Fenwick Willian

    Changes to UK regulation for insurance intermediaries

     

    My name is Andrew Samuel and I'm an Associate in Holman Fenwick Willan's Insurance Transactions and Regulation team.

    On 1 April 2013 the Financial Services Authority (referred to as the FSA) was replaced by three new regulatory authorities, the Financial Policy Committee, the Prudential Regulation Authority (referred to as the PRA) and the Financial Conduct Authority (referred to as the FCA). The FCA is now the primary authority for prudential and conduct regulation of insurance intermediaries, as well as other non PRA regulated entities.

    The FCA

    Unlike the PRA which is a subsidiary of the Bank of England, the FCA is a separate legal entity (which was adopted from the FSA). In many ways firms may view the FCA as the FSA with a different name, however, there are some notable differences in the approach adopted by and powers available to the FCA compared to its predecessor.

    The FCA has an overarching strategic objective "to ensure that markets function well" which are complemented by three operational objectives: (a) to secure an appropriate degree of protection for consumers; (b) to protect and enhance the integrity of the UK financial system; and (c) to promote effective competition in the interests of consumers.

    It is clear from the literature produced so far that the FCA is intending to achieve these statutory objectives through a judgement based and pre emptive approach, which will include focus on product governance, early intervention and review of the risks caused by wholesale (as well as retail) conduct.

    How will the FCA supervise firms?

    The FCA has indicated that there are three pillars to its supervisory approach:

    1. Proactive Firm Supervision (Firm Systematic Framework) – this will involve specific firm assessment, the purpose of which will be to assess that a firm is being run in a way that treats customers fairly, minimises risk to market integrity and does not impede effective competition

    2. Event Driven Work – dealing with matters that are emerging or have happened and are unforeseen.

    3. Issues and Products Work (or thematic supervision) – sector risk assessment of areas delivering poor outcomes.

    Conduct and prudential supervisory categories

    There are new conduct and prudential classifications for firms regulated and supervised by the FCA, which will determine the intensity of the supervision undertaken in relation to those firms. As with the FSA regime, the intensity of supervision is determined on the level of risk a firm presents to the market.

    The conduct classifications are: C1, C2, C3 and C4. It has been indicated that smaller firms including almost all intermediaries are likely to fall within the C4 category. Firms which have substantial retail operations or large wholesale operations such as insurance groups, banking groups and investment banks are likely to comprise the C1 to C3 categories.

    Firms within the C4 category are supervised by a team of sector specialists rather than a dedicated supervisor and are subject to a lighter assessment than other categories with a requirement to "touch point" with the regulator (which could be via a road show, an interview, a call, an online assessment) during a 4 year cycle to determine how they are running their businesses.

    The prudential classifications are: prudentially critical firms (P1); prudentially significant firms (P2); prudentially insignificant firms (P3); and firms requiring a differentiated approach to prudential supervision (P4) (for example, firms in insolvency or administration or special supervisory regimes). The distinctions between each of these categories appears to rely on factors such as the potential contagion effects caused by a firm's failure to its group and other market participants and the extent of a firm's client money and asset holdings.

    New Product Intervention Powers

    The FCA has broader powers than its predecessor, particularly, in respect of product intervention. The FCA can prohibit firms from entering into specified agreements if it appears necessary or expedient to advance the consumer protection objective, the competition objective, or where the Treasury makes such an order, the market integrity objective. As part of these powers, the FCA can, without public consultation, make product intervention rules lasting for a maximum period of 12 months.

    The FSA Handbook

    The FSA Handbook has been divided into a FCA Handbook and a PRA Handbook, according to the apportionment of regulatory powers and responsibilities between the two authorities under the new regime. The existing substantive provisions of the FSA Handbook are largely unchanged and most of the new provisions in the handbooks have been to implement the new procedures and powers being introduced under the Financial Services Act 2012 and to support the creation of the new structure.

     

    -END-

    To watch this video go to http://youtalk-insurance.com/insurance-broker-knowledge/holman-fenwick-willan-0

    The thoughts and opinions shared in this video transcript are provided for information purposes only and do not represent the views and opinions of You Talk Insurance Limited.  Professional advice should always be sought before making any decision

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    CYBER LIABILITY AND THE BI IMPLICATIONS

    Hello. My name is John Barlow and I am a partner at the law firm, Holman Fenwick Willan.

    1. Cyber liability covers a multitude of sins and you as buyers of cyber products need to be clear what risks you want to insure and what products cover those risks.

    2. The emphasis to date has been on data breach response packages (and these products have been highly publicised because of the breaches which have occurred – for example, Sony, Amazon and TJ Maxx).  These "packages" essentially address the disclosure of confidential or proprietary information (whether accidentally or where the information has been stolen).  When these events occur the policy provides for notification to the relevant authority (if required), credit monitoring, public relations and forensic analysis. These are, in essence, mitigation of loss policies.

    3. Cyber liability also covers network security liability; for example where your network is compromised and transmits malware to a third party.

    4. However, what I am going to focus on here, are non physical business interruption losses which have occurred through criminal cyber activity.

    5. Whilst the press has been consumed with the theft of data from companies, the area where the biggest losses are likely to occur and therefore have the most significant implications for businesses are in connection with, for example, denial of service activities or where the server is taken down – orders cannot be processed, jobs for customers cannot be actioned, production lines cannot function and your client's business grinds to a halt.

    6. Whilst the breach response package is obviously helpful in reducing the business interruption as much as possible (and can be an effective means of mitigating the disruption to your clients' businesses), it is the financial loss over the period which can be significant.  Critically, this is where business interruption cover should step in.

    7. Currently classic business interruption is available where there has been destruction of tangible property, for example bricks and mortar, but non tangible risks tend to be excluded. Often business interruption is linked to the property damage insurance policy  There is debate that business interruption policies may provide some form of cover for  non-tangible or cyber risks, but in the absence of express cover, it is advisable not to rely on potential uncertainties; therefore you need to look for express business interruption cover for cyber risks.

    8. There is a growing realisation in the insurance market that cover for non tangible business interruption losses is required (either through the removal of certain exclusions or a standalone cover). Clearly, within this short piece, I cannot address all the issues which attach to business interruption cover, but insureds should look at, in particular, the application of the deductible, the length of time for which an indemnity is available for business interruption and the valuation provisions.

    9. In buying these products, you should not lose sight of the advantage which pre-inception due diligence brings to understanding the risk, mitigating the risk, reducing premiums and having the necessary information for the crisis management team when a cyber loss emerges and which will enable the team to stem the losses and get the systems up and running as soon as possible.

    Thank you for watching. If you would like to know more, please get in touch.

    END

The thoughts shared by the contributors to this site are not the views and opinions of youtalk-insurance and it is recommended that professional advice should sought before making any decision.

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