Welcome to the final Insurance Briefing of 2017 - our fortnightly round-up of insurance legal and business developments with analysis and commentary from the insurance team at Pinsent Masons.
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The eight topics we're focusing on this week include:
Broker fined £4m by FCA over 'truly independent' claim
An insurance broker has been fined over £4 million by the Financial Conduct Authority (FCA) for failing to adequately manage potential conflicts of interest involving its parent company. Bluefin Insurance Services Ltd held itself out to be a "truly independent" broker during a four-year period while it was wholly owned by the insurer AXA UK Plc, according to an FCA notice. The FCA also found that Bluefin had failed to put adequate systems in place to manage the conflict of interest arising from its ownership. Jonathan Cavill, a contentious regulatory expert at Pinsent Masons said: "Brokers are often faced with a potentially risky conflict of interest situation; some of these involve the parent who owns it, and some do not. The relevance of this fine is not isolated simply to where brokers are owned by an insurer or provide misleading information. Coupled with the upcoming rules in the Insurance Distribution Directive on disclosure of broker shareholdings to clients, the fine reinforces the need for brokers to properly assess their conflict of interest risks and ensure that they are on the right side of the line with the regulator."
Pension fund management services provided by non-insurers subject to VAT under EU law, court says
Pension fund management services provided by non-insurers do not fall within the exemption in the VAT Directive for insurance transactions, the UK High Court has decided in a case concerning the trustees of the pension fund for United Biscuits, the snack food manufacturer. The trustees were seeking to recover from HM Revenue & Customs (HMRC) VAT they had paid for pension fund management to investment managers who were not insurers. The trustees argued that the supplies of management services by the non-insurers were insurance transactions for the purposes of the EU VAT Directive and therefore should have been exempted by UK law. HMRC argued that investment services did not constitute insurance business as there was no element of risk.
MPs call for urgent ban on pensions cold calling
The House of Commons Work & Pensions committee has urged the government to accelerate plans to ban pensions cold calling and provide better guidance to pensioners on their options. The committee said the government should take "urgent legislative action" through the Financial Guidance and Claims Bill to put an enforceable ban on cold calling in place by June 2018 at the latest. The committee said the timetable for implementing a ban as set out in the bill was not fast enough and contrasted "with the haste in which pension freedoms were introduced".
ANALYSIS: Cyber fraud is one of the biggest commercial and legal threats faced by businesses in the world, so it is no surprise to see UK police division Action Fraud launch a 24/7 helpline to combat cyber fraud attacks against businesses, charities and organisations. Almost half of all businesses - 46% - experienced a cyber breach or attack in 2016/17, according to the 2017 Cyber Security Breaches Survey carried out by the UK government's Department for Culture, Media and Sport (DCMS). During a year-long pilot of its 24/7 helpline, Action Fraud received 377 incident reports, which it was then able to pass on to the National Cyber Crime Unit or local police forces for investigation.
UK and EU announce 'agreement in principle' on first phase of Brexit negotiations
The UK and European Commission have announced "agreement in principle" on the first three areas up for negotiation as part of the UK's exit from the EU. A joint statement commits the UK to "full alignment" with EU customs rules in Northern Ireland and "no new regulatory barriers" between Northern Ireland and the rest of the UK. Negotiators have also reached agreement on how best to protect the rights of EU citizens in the UK and UK citizens in the EU after Brexit, and on the terms of the UK's financial settlement with the EU.
MPs approve new UK insurance linked securities framework
Two sets of regulations that will create a framework for issuing, regulating and taxing insurance linked securities (ILS) in the UK have been approved by a committee of MPs. The Risk Transformation Regulations and Risk Transformation (Tax) Regulations will now become law in the coming days, opening UK the possibility for the first UK ILS to be created in 2018. "Despite the period of political uncertainty earlier this year which hampered progress, it is great to see the new UK ILS framework coming into being before the end of 2017," said insurance law expert Nick Bradley of Pinsent Masons. "Significant effort from various stakeholders would have been involved and is worth congratulating. We look forward to seeing what 2018 will bring in terms of the development and growth of the ILS hub in the UK," he said.
New regulations can help UAE's reinsurance market to mature, says expert
ANALYSIS: The introduction of a new robust reinsurance framework in the UAE would be a major step towards growing the local market, but it may not convince international reinsurers to move away from the current practice of spreading risk through other international markets. The UAE's Federal Insurance Authority (IA) has proposed a new reinsurance regime. It has published draft regulations. Following on from its game-changing life insurance regime, the IA shows no sign of slowing down in its quest to spread its regulatory framework into all corners of the UAE's insurance market.
Irish regulator fines life insurer €1m for anti-money laundering failures
Italian life insurer Intesa Sanpaolo Life dac (Intesa) has been fined €1 million by the Irish insurance regulator for anti-money laundering and terrorist financing compliance failures. The breaches, which took place between 2010 and 2014, relate to life assurance products sold by Intesa in Italy and Slovakia. The firm is also the largest 'cross-border' life insurer authorised to operate in Ireland by the Central Bank of Ireland.
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