The financial services industry, including the non-life insurance industry, has commented on several draft regulations and items of legislation over the last year.
I will discuss some of them that were distributed by regulators in early 2022, or even as far back as 2021 that we can expect to be dealt with this year, or at least taken further, once all the comments have been considered.
Draft regulations and items of legislation
The first two matters the industry is keenly waiting for is the publication of the final draft of the Conduct of Financial Institutions (COFI) Act, which will finally amalgamate the various items of legislation governing the conduct of financial institutions.
Comments were submitted some time ago, by the industry who is now keenly waiting for the submission of the bill to parliament. This will strongly impact product oversight and design, which is part of the Policyholder Protection Rules (PPRs) but not legally part of the commercial space and will formally legislate the six outcomes of Treating Customers Fairly (TCF) in the commercial space.
The requirement to submit a transformation plan to the Financial Sector Conduct Authority (FSCA) will become law and all financial service providers will need to be re-licensed. At the same time, the draft amendments to the PPRs were released in 2021, and many comments were submitted from the industry, given that the main intention of the amendments was to include all commercial policies in the definition of policies to be affected. No final confirmation has been given, as to whether the FSCA intends to still promulgate the new PPRs or simply wait until COFI is passed, which will include all the amendments of the PPRs. This would be the preferred route if COFI can be finalised. Premium collection and intermediary functions and outsourced functions would hopefully be addressed there as well, as there are still expectations for potential amendments in these two areas. Premium collection, specifically with respect to premium collection systems that place the premium directly into the bank accounts of insurers is still regarded as accounting for premium (which is defined as an intermediary service), but a fee may still be paid to the premium collection agency even though the full commission is being paid to the broker. This is currently governed by an annual exemption, allowing the fee to be paid, but this issue will need to be sustainably resolved, once and for all. The whole issue of premium collection being regarded to an outsource function still needs to be debated further, as it has a large bearing on remuneration.
More to be dealt with in 2023
The second item we can expect to be dealt with is the Joint Standard on Cybersecurity and Cyber Resilience Requirements, which was amended in response to the various comments submitted to the FSCA, in early 2022. This Joint Standard addresses the requirements relating to governance, cybersecurity strategies and frameworks, cybersecurity and cyber resilience fundamentals, cybersecurity hygiene practices, as well as notification and regulatory reporting.
Thirdly, on the back of the FSCA’s standard on cell captives submitted last year, the industry is waiting for the Prudential Authority (PA) to release their cell captive standard which will deal with cell ownership, the requirement of the cell owner to properly capitalise the cell and the requirement for dedicated cell captive licenses. Also given the large emphasis on transformation and succession planning in the regulator’s agenda, the expectations are that the FSCA and PA will more formally deal with these themes during the course of 2023.
Last, but not least.
Finally, the Competition Commission has become more active of late in the non-life industry, specifically with regards to procurement panels and how such panels are put together, and while there are guidelines that have been made available to the industry as to how the Competition Commission will assess anti-competitive complaints with regards to preventing new entrants into the market, this may become more obligatory in 2023.
Article by Danny Joff