Insurance regulatory news, August 2020 #2

Hogan Lovells
Contact

Hogan Lovells

Recent regulatory developments of interest to insurers and their intermediaries. See also our General regulatory news in the Related Materials links.

Contents

  • COVID-19: FCA statement on non-damage BI settlements and deductions relating to government support
  • COVID-19: FCA updates on business interruption insurance test case
  • Providing data under the Civil Liability Act 2018: FCA statement to insurers
  • Solvency II: Implementing Regulation on technical information for calculation of technical provisions and basic own funds for Q3 2020 reporting

COVID-19: FCA statement on non-damage BI settlements and deductions relating to government support

The UK Financial Conduct Authority (FCA) has published a statement on non-damage business insurance (BI) settlements and deductions in relation to government support. The FCA is aware of policyholder concerns about how insurers are calculating non-damage BI claim payments where they have agreed liability. In particular, some insurers are making deductions for some types of government support that policyholders have received over the past few months.

Where insurers have accepted liability, they should continue to handle and assess non-damage BI claims promptly and fairly, and to treat their customers fairly in accordance with FCA Principles for Business 6. The insurer will need to assess the appropriateness of making deductions for some or all of each type of government support received by the policyholder with a case by case assessment. The assessment should consider:

  • the exact type and nature of the government support;
  • how the policyholder used this support; and
  • the type of policy and its precise terms, including any set methodology for calculating the value of a claim set out under the relevant section of the policy.

Some of the factors will be case and claim specific. Even where it is appropriate in principle to deduct amounts, a single, uniform approach to deductions is unlikely to be appropriate. Insurers are likely to need to consider individually the precise details of the policy, the claim and the use and application of the government support the policyholder received. How government support is treated for tax purposes may differ from the way it is treated for calculating the loss under a BI policy.

The FCA expects firms to take these matters into account when they calculate non-damage BI claims. It also expects them to reflect these matters appropriately in their communications with policyholders when making settlement offers and reaching settlement on relevant BI claims.

If necessary, the FCA may intervene and take further actions where firms do not appear to be meeting its expectations and treating their customers fairly on these points.

COVID-19: FCA updates on business interruption insurance test case

On 31 July 2020 and 3 August 2020, the FCA updated its webpage on the High Court business interruption insurance test case.

The FCA has published some supplementary notes on the webpage and the draft transcript of the final eighth day of the trial, which took place on 30 July 2020.

The trial has now concluded and judgment is awaited.

The FCA will update its webpage when the judgment is released and when a final transcript is available.

Providing data under the Civil Liability Act 2018: FCA statement to insurers

The FCA has published a statement about data provision under the Civil Liability Act 2018.

The Civil Liability Act imposes a duty on insurers to provide information to the FCA about the effect that changes to the law under the Act will have on motor insurance premiums. More information about the insurers in scope and what information they need to provide is contained in the Civil Liability (Information Requirements) and Risk Transformation (Amendment) Regulations 2020. The data to be provided covers three annual periods commencing on 1 April 2020 and finishing on 31 March 2023, and needs to be provided to the FCA as a single return by 1 October 2023.

The FCA intends to send out a survey to insurers in September 2023 that will enable them to inform the FCA whether they are in scope and to provide the necessary information. It has published a template for the survey and comments from the Association of British Insurers on the template.

Solvency II: Implementing Regulation on technical information for calculation of technical provisions and basic own funds for Q3 2020 reporting

Commission Implementing Regulation (EU) 2020/1145 laying down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 30 June 2020 until 29 September 2020 under the Solvency II Directive has been published in the Official Journal of the EU.

The Implementing Regulation, which was made under Article 77e(2) of the Solvency II Directive, sets out the technical information to be used by reinsurers and insurers when calculating technical provisions and basic own funds for reporting with reference dates in Q3 2020.

To ensure uniform conditions for insurers and reinsurers calculating technical provisions and basic own funds, the Solvency II Directive requires that technical information on relevant risk-free interest rate term structures, fundamental spreads for the calculation of the matching adjustment and volatility adjustments must be laid down for every reference date. In each case, the technical information is based on market data related to the end of the last month preceding the first reporting reference date to which the relevant Implementing Regulation applies. In July 2020, the European Insurance and Occupational Pensions Authority (EIOPA) provided the Commission with the technical information related to end of June 2020 market data.

The Implementing Regulation enters into force on 4 August 2020 and applies from 30 June 2020.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Hogan Lovells | Attorney Advertising

Written by:

Hogan Lovells
Contact
more
less

Hogan Lovells on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide