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Continued FCA focus on appointed representatives – more regulatory interventions in the London Market

27 June 2017. Published by Jonathan Charwat, Partner

FCA announce follow up supervisory work and regulatory interventions on insurance intermediaries with networks of appointed representatives (ARs).

As part of its June Regulation round-up, the FCA has announced that it has carried out follow up supervisory work on insurance intermediaries with developed networks of ARs. The FCA has visited 20 principal firms and undertaken interventions in more than a third of those visited.

 Last year, we blogged on the significant failings identified in the FCA's Thematic Review of principal firms and their ARs.  The Thematic Review, which sampled 15 principal firms in the general insurance market, found that a significant number did not understand the risks of using ARs and did not have in place effective systems and controls to monitor the risks. As a result of the review, the FCA took early intervention with five principals.

This more recent supervisory work has focused on London Market insurance intermediaries and the FCA found that the issues identified in the Thematic Review exist in a wider sample of firms in this market. In the same vein as the Thematic Review, the FCA found widespread failings of a principal's oversight of ARs. The FCA has summarised its findings, expectations and the actions taken in a helpful one-pager on its website.

 As a result, voluntary requirements have been placed on the permissions of seven principal firms and the FCA has commissioned two s166 skilled persons reports.

 This is clearly an area of supervisory focus and follows a slew of publications / activity in 2016, including:

 The PRA publication on its approach to supervising insurers in March 2016

  • The FCA Thematic Review (outlined above) in July 2016 (our blog here)

  • The FCA Dear CEO letter to CEOs of principal firms operating in the general insurance sector in July 2016

  • The International Association of Insurance Supervisors application paper on approaches to supervising the conduct of intermediaries (our blog here)

In its latest round-up, the FCA also identified significant shortcomings in the sale of warranty insurance products and examples of potential mis-selling because of customers not receiving adequate information. In its sign-off to this section, the FCA reminds principals who have ARs to consider its Thematic Review, conduct a gap analysis of their current activities against the findings and their regulatory obligations to ensure that customers (whether through ARs or not) are at the centre of business models and consistently treated fairly. As we can see from the high number of regulatory interventions, the FCA clearly feels this is an area for continued scrutiny.