Is your compliance up to date with the latest regulations

Compliance

Authored by Aviva

In last month's article, we looked at the need for firms to think about their governance and controls in the light of what went well – and not so well – in terms of operating compliantly during initial lockdown.  With the second wave of the pandemic impacting across the country and increased restrictions in place, with potentially more to follow, shoring up your governance structure could be key to a business’s survival in what looks set to be an extraordinary and hugely challenging environment for many months to come. Once again, our new ABC compliance support provider UKGI, shares some key points to think about.

Governance remains an FCA focus

Robust governance, underpinned by good culture, is a very clear focus of current, and ongoing, regulatory attention.  It is clear that the FCA is striving to concentrate the minds of those responsible for the management of general insurance intermediaries (among other regulated sectors) on their continuing duty to meet their regulatory responsibilities.  A duty which, since the implementation of the Senior Managers and Certification Regime for solo-regulated firms, might feel a lot more personal for Senior Managers than ever before.

Last month alone saw the FCA issue two Dear CEO letters to the GI intermediary sector focused on risk and controls. The first letter, sent in early September, set out the FCA’s view of the key risks posed by the sector and the second, sent at the end of September, related to CASS and the need for general insurance intermediaries to have adequate client money arrangements.  These letters were in addition to the publication of potentially some of the most significant proposed regulatory developments around pricing that the general insurance sector has seen for some years.

Dear CEO letters

In the first of its Dear CEO letters the FCA cited a number of concerns in regard to what it sees as risks posed by the general insurance intermediary sector – for example the risks posed by incentive arrangements which fail to support a positive conduct culture; business models which provide poor control over sales and renewals and conflicts of interest including those arising through Appointed Representatives. 

As well as these specific issues the FCA also focused on the broader matter of effective management, unpicking what it identified as the components of good governance.  These included firms having clear accountabilities with appropriate channels of escalation, a robust risk framework which identifies key risks of harm monitored and mitigated by accountable individuals with strong, independent Board oversight and challenge.

Client money – possibly one of the least understood aspects of regulation?

The most recent Dear CEO letter – published just at the end of September - focused on intermediaries’ responsibilities in respect of client money.  Client money is a curious beast in some ways; it is almost certainly the least changed of any aspect of FCA regulation of the general insurance sector since regulation began but it remains, in our view, one of the least understood (if measured by the queries and questions firms still raise on this issue).

In its letter the FCA stuck with the theme of appropriate governance and oversight but also looked at some very specific issues relating to client money including client money calculations and reconciliations, money held by Appointed Representatives and acknowledgement letters for all client money accounts.  The Regulator also reminded firms that risk transfer only holds good where firms are complying with the terms of any risk transfer agreements – always provided of course those agreements are effective in the first place.

Take heart - there is support out there

It can be all too easy to end up telling brokers what they should be doing without actually providing the bit that really helps – which is the how.  Or better still providing the tools which can support the ‘how’.

These days compliance support is a necessity not a luxury and its reassuring to know there is support available when you need it.  If you’d like to speak to us about the right Compliance proposition package for your business, email brokerpropositionssupport@aviva.com, and we’ll be able to point you in the direction of our compliance support suppliers UKGI and RWA.

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