Featured Product

    FCA Conducts Review of Third-Party Service Providers for Life Insurers

    March 04, 2020

    FCA conducted a review of outsourcing and third-party service providers for life insurers. FCA identified governance over outsourcing as a priority area for supervision in the life insurers’ portfolio strategy. While the review did not find evidence of a widespread failure to manage the risks to customers arising from outsourcing, improvement is needed. The FCA review covered exit planning, business continuity planning, and governance, systems, and controls. FCA also highlighted the good and poor practices of the firms it observed.

    In carrying out this review, FCA took into account the existing regulatory framework, including the Principles for Businesses in FCA Handbook. FCA also considered the guidance for firms outsourcing to the cloud and other third-party IT services. Generally, life insurers have extensive governance, systems, and controls over outsourced activities. However, some firms were not identifying and managing operational risks throughout the life span of outsourced arrangements from inception to business-as-usual operation and to exit from the arrangements. The following are the key highlights of the review: 

    • Exit planning. FCA reviewed the adequacy of firm plans for exit from an outsourcing arrangement including planned and unplanned exits. The level of detail contained in the exit plans varied. In some cases, a lack of detail gave insufficient confidence that the plan could be carried out in a way which would avoid customer harm. The risk of such harm is also affected by the business model of the life insurer and the services provided by the outsourced service providers.
    • Business continuity planning. FCA reviewed whether firms had adequate arrangements in place for system outages or disaster recovery in respect of outsourced activities. In most cases, the outsourced service providers use their own IT systems rather than systems operated by the life insurer. Where this applies, outsourced service providers carry out business continuity testing rather than life insurers. For all life insurers in the FCA sample, their service carried out recent (at least annual) business continuity planning testing, which they confirmed to the insurer. Some firms discuss and obtain detailed information on the scope and scale of business continuity testing from the outsourced service provider. This information enables them to assess the results of that testing and the standard to which it has been carried out. However, some firms obtain more limited information from outsourced service providers. So they may not be able to satisfy themselves that the testing is robust or meets their needs.
    • Governance, systems, and controls. FCA reviewed the quality of governance and risk frameworks, including management information, for outsourced service providers arrangements. Information provided to outsourcing governance committees tended to focus on operational performance, with less emphasis on customer outcomes. Where outsourcing management information identified shortcomings, it was in some cases unclear what risk they posed to customers or whether timely and effective remediation action had been taken. In response to the queries of FCA, most firms were able to provide customer-centric management information and reasonable explanations of what actions they had taken and why. However, in some cases, firms did not provide this information as part of the outsourcing management information to their outsourcing governance committees. Some firms were unable to demonstrate that their outsourcing governance committees had sufficient focus on customer fairness, in addition to operational issues. There is a risk that ensuring customer fair treatment may be seen within some firms as a separate compliance-related issue, rather than being an integral part of oversight and control over outsourcing.

     

    Related Link: FCA Review

    Keywords: Europe, UK, Insurance, Life Insurance, Outsourced Service Providers, Operational Risk, Outsourcing Arrangements, FCA

    Related Articles
    News

    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.

    January 13, 2022 WebPage Regulatory News
    News

    EBA Issues Guide on Bank Resolvability, Consults on Transferability

    The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).

    January 13, 2022 WebPage Regulatory News
    News

    HKMA Extends Repayment for Trade Facilities, Consults on Crypto-Assets

    The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.

    January 12, 2022 WebPage Regulatory News
    News

    FCA Registers Securitization Repositories; PRA Issues 2022 Priorities

    The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.

    January 12, 2022 WebPage Regulatory News
    News

    EC Regulation Sets Out Methods for Measuring K-Factors Under IFR

    The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.

    January 11, 2022 WebPage Regulatory News
    News

    BIS Studies How Platform Models Impact Financial Stability & Inclusion

    The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.

    January 10, 2022 WebPage Regulatory News
    News

    ESAs Publish List of Financial Conglomerates for 2021

    The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.

    January 07, 2022 WebPage Regulatory News
    News

    APRA Licenses Two More Banks, Reduces Committed Liquidity Facility

    The Australian Prudential Regulation Authority (APRA) updated the list of authorized deposit-taking institutions, granting license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.

    January 07, 2022 WebPage Regulatory News
    News

    EU Issues SII Corrigendum; EIOPA Assesses SII Reporting Exemptions

    EU published, in the Official Journal of the European Union, a corrigendum to the Delegated Regulation 2015/35, which supplements Solvency II Directive (2009/138/EC).

    January 06, 2022 WebPage Regulatory News
    News

    EBA Opines on Impact of De-Risking and Associated AML/CFT Challenges

    The European Banking Authority (EBA) published an Opinion on the scale and impact of de-risking in European Union and the steps that competent authorities should take to tackle unwarranted de-risking.

    January 05, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7860