THE LEGAL (AND REGULATORY) HORIZON JOHN GILBERT M & G ADVISORY SERVICES HOGAN LOVELLS
TOPICS • Corporate Governance • TCF for closed book policyholders • PRIIPs • Mutual Deferred Shares • New reporting requirements for non-SII firms • Insurance Distribution Directive M & G ADVISORY SERVICES HOGAN LOVELLS
CORPORATE GOVERNANCE Board Responsibilities • PRA Supervisory Statement SS 5/16, March 2016 • Largely reinforces UK Corporate Governance Code - collective responsibility; clear delegation - NED knowledge and sector experience - NEDs should seek external advice where appropriate Member Engagement • Increased focus for regulators • Threat of demutualisation Actions for NEDs : - Ensure board has necessary skills and experience and is aware of responsibilities - Focus on member engagement M & G ADVISORY SERVICES HOGAN LOVELLS
TCF OF CLOSED-BOOK POLICYHOLDERS • FCA Thematic Review reported in March 2016 (TR16/2) • Consultation on proposed guidance closes June 2016 • Mixed picture of (mostly) good but (sometimes) poor practice • Areas of criticism: - reliance on contractual terms “might not necessarily ensure a fair outcome” - frequency and quality of policyholder communications - fee structures -lack of board focus Actions for NEDs : Read TR16/2 Question executive on treatment of long- standing customers Consider whether board gets adequate MI M & G ADVISORY SERVICES HOGAN LOVELLS
PRIIPS • Stands for “Packaged Retail Investment and Insurance-based Products” • Applies to most life products including with-profits and Holloway (despite Holloway exemptions from COBS20 and RDR) • EU Regulation of November 2014 to be implemented by 31 December 2016 • Proposed Regulatory Technical Standards published April 2016; FCA to consult on implementation in UK • Key Investor Information Documents to be replaced by Key Investor Documents in standard form for all affected products throughout EU • Insurance Europe: - critical of short timescale for implementation - believe standard information discriminates against insurance based products Actions for NEDs : Question executive on n preparedness for issuing KIDS M & G ADVISORY SERVICES HOGAN LOVELLS
MUTUAL DEFERRED SHARES • Mutuals’ Deferred Shares Act passed in 2015 • Consultation on regulations awaited from Treasury • Creates new instrument by which mutual insurers can raise Tier 1 capital while protecting mutual status • Costs of issue of listed securities likely to limit appeal to larger mutuals • Nevertheless, opportunities for smaller mutuals: private placements, new product lines, Islamic insurance? Actions for NEDs : Consider whether MDS is an opportunity for your Society Respond to Treasury consultation M & G ADVISORY SERVICES HOGAN LOVELLS
NEW REPORTING REQUIREMENTS • PRA Consultation Paper CP18/16 published May 2016 • Applies only to non-Solvency II firms • Proposes - Deletion of IPRU(FSOC) - Simplified 3-yearly FSC2 returns for registered and incorporated societies on a single cycle starting at 2017 year-end - Abolition of FSC1 and FSC3 returns - Retention of annual FSC 4 certificate Actions for NEDs : If a non-SII firm, watch for PS to implement the proposals Ensure executive is up-to-speed with changes M & G ADVISORY SERVICES HOGAN LOVELLS
INSURANCE DISTRIBUTION DIRECTIVE • Follows IMD1 in 2002 - IMD1 already “gold-plated” in UK - but applied only to “pure” intermediaries • IMD2 morphs in IDD - covers all channels of distribution - must be transposed by national regulators by February 2018 - requirement to act “honestly, fairly and professionally” and to act in “best interest” of customer - FCA consultation expected late 2016/early 2017 Actions for NEDs : Keep a watching brief for the time being M & G ADVISORY SERVICES HOGAN LOVELLS
CONTACT DETAILS John Gilbert 077 6838 2086 Hogan Lovells M&G Advisory Services john.gilbert@hoganlovells.com john.gilbert@mgadvisory.co.uk www.hoganlovells.com www.mgadvisory.co.uk M & G ADVISORY SERVICES HOGAN LOVELLS
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