Insurance in Financial Services UK

“Is your conduct framework adding enough value?” - How Lloyd’s and London market insurers are evolving their conduct frameworks

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It’s the most frequent question I’ve been asking my Lloyd’s and London market clients since the turn of the year.

The question itself is testimony to the extent of work that the market has undertaken to design, implement and embed conduct frameworks over the last few years, particularly in relation to delegated authority business. These relatively new frameworks have been working in practice for long enough for the conversation to move towards efficiency and evolution.

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Posted on 11/04/2017 | 0 Comments

Solvency II: Ten things we have learned about the PRA’s latest view

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Two recent public events, a speech to the ABI by PRA Executive Insurance Director David Rule, and an evidence session to the Treasury Select Committee (TSC) enquiry into Solvency II led by PRA Deputy Governor Sam Woods, with messages reinforced in a subsequent speech by Sam Woods on 20 March on the PRA insurance objective, provide important insights into the PRA’s latest view of Solvency II. But there were also a few straws in the wind as to how the PRA, if given a free hand post-Brexit, might want to adjust the UK prudential insurance regime. This would not involve any wholesale departure from Solvency II, which the PRA thinks is essentially working well, but might involve a limited move towards a less prescriptive, principles-based regime slightly more in the mould of its ICAS predecessor. Notable features of any adjusted regime might include:

  • Some streamlining of data collection and transitional recalculation;
  • More flexibility on matching adjustment eligibility, particularly on cash flow fixity;
  • A continuing role for the risk margin (albeit using a much less interest rate sensitive calibration); and
  • Continued application of the quantitative indicator (“QI”) actuarial framework, involving more granular sectoral coverage, to underpin future model approval and change judgements.

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Posted on 30/03/2017 | 0 Comments

No margin for error: Making the margin requirements for non-cleared OTC derivatives happen

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The implementation of the mandatory exchange of initial and variation margin for non-cleared OTC derivative trades in the EU commenced on 4 February for financial counterparties with the largest derivatives portfolios. The introduction of these rules – which was part of the G20’s mandate to reduce the systemic risk posed by the OTC derivatives trading – is expected to lead to an increase in the cost of trading for non-cleared trades.

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Posted on 09/03/2017 | 0 Comments

IT Risk Management practices – still fit for purpose?

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The demand for IT risk management is rapidly increasing in response to the rise in threats and the unprecedented wave of innovation spreading across the financial services industry.  Now is the time for senior financial services risk professionals to begin preparing for the array of changes that are altering the world in which we live.

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Posted on 03/03/2017 | 0 Comments

Make sure you’re on the right track - Internal audit of remuneration

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In recent years, the regulatory and governance framework in financial services organisations has become increasingly complex. A key area of focus has been in the area of remuneration structures, policies and processes, where there has been a significant amount of regulatory development.

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Posted on 20/02/2017 | 0 Comments

IFRS 9 and the “is it a bird, or is it a bomber?” problem

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With the adoption of the IFRS 9 accounting standard into EU law, it is full steam ahead for banks to deploy credit models that estimate Expected Credit Loss (ECL) accounting values. The standard requires firms to account for lifetime ECL on loans that have experienced a “significant increase in credit risk” (SICR), but allows firms to reach their own conclusions as to just how much credit risk ought to be viewed as “significant”.

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Posted on 10/02/2017 | 0 Comments

Biased Expectations: Will biases in IFRS 9 models be material enough to impact accounting values, as well as other applications such as pricing?

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As European IFRS reporters enter 2017, the first generation of Expected Credit Loss (ECL) models have generally been developed, and granular transitional impacts quantified.

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Posted on 17/01/2017 | 0 Comments

Complaint identification and reporting: The impact of recent rule changes

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‘We want to ensure that the process of complaining is straightforward, transparent and fair to consumers, while allowing firms to handle complaints as efficiently as possible and for consumers to have effective access to the ombudsman service if they remain dissatisfied.’ Financial Conduct Authority (FCA)

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Posted on 19/12/2016 | 0 Comments

Regulating cyber-resilience

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Looking ahead to 2017, one of the most important areas of regulatory development that we see in financial services is rising supervisory expectations of firms’ cyber resilience. A spate of recent incidents of cyber-crime and IT failure have sharpened the focus of firms on their cyber preparedness, but management and boards should now also expect to be more routinely challenged by their supervisors on how well they understand and what they have done to limit their exposure to cyber and IT risks.

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Posted on 14/12/2016 | 0 Comments

11 ways to navigate financial markets regulation in 2017

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2016 has been another difficult year for the financial sector, with economic and political uncertainty complicating the completion of the post-crisis regulatory repair agenda.

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Posted on 06/12/2016 | 1 Comments