The Financial Conduct Authority (FCA) has published revised guidance on its approach to insurance business transfers under Part VII of the Financial Services and Markets Act 2000. The publication of the final guidance follows a consultation launched in July 2021.
The revised guidance (FG22/1) replaces previous guidance (FG18/4) first published in May 2018. The revised guidance reflects feedback received from stakeholders and the experience of reviewing Part VIIs undertaken in the past few years.
Changes introduced into the guidance include:
- A requirement for the independent expert, when working on two consecutive Part VIIs, to demonstrate that they can act independently.
- The requirement for the independent expert’s entire team to have sufficient skill and experience.
- A new section on general expectations in the chapter on the FCA’s approach. The general expectations include an expectation that documents submitted to the FCA will be in near-final form and an expectation that applicants consider whether there are particular issues in the transfer that the FCA will wish to consider and proactively provide the FCA with such information.
- A requirement for applicant firms to clearly explain the reason for the transfer and explain how they have satisfied themselves that the transfer will not have a material adverse impact on policyholders.
- Applicant firms must show that they have considered both negative and positive impacts on policyholders including changes to claims philosophy, the impact of the proposals on vulnerable policyholders and statements previously made which policyholders might seek to rely on (including statements on policy documents or websites).
- Expectations in respect of objections from policyholders and others. The revised guidelines require that objections are addressed in sufficient detail and should engage with policyholders.
- Clarity that the FCA expects the independent expert’s report to show sufficient consideration of evidence that the transfer will not have a material adverse effect on policyholders. This will include looking at service levels such as claims handling and complaints, customer feedback. The independent expert should also review the firm’s employer’s liability tracing arrangement (where relevant).
- An expectation that brokers and coverholders will co-operate with a request for data in relation to policyholder notification.
- The requirement for policyholder communications to be easily understood (previously the guidance said understandable).
- Phone lines to be open at appropriate times.
- Proposals for non-postal communication. The FCA guidance says that it is open to considering alternatives means of communicating with customers (for example email).