Record of meeting on 21 March 2006 between the industry and the FSA

Attendees

  1. A list of those present is attached.

 

Background

  1. The FSA is setting the industry a challenge to secure a market-driven solution to the issue of contract certainty by December 2006. The work fits within the FSA's strategic aim of promoting efficient, orderly and fair markets, working with the grain of the market wherever possible. It will reduce the operational and legal risks to brokers and insurers and improve service and clarity of offering to customers. It will enhance transparency whilst preserving the diversity and competitive position of the market.

  2. Since the start of the challenge in December 2004, the FSA has made it clear that its preference is for a market solution to resolve the issue of contract certainty; however, if the market solution does not deliver, the FSA will consider regulatory intervention although that is not the FSA's preferred outcome.

  3. The FSA has been following the work of the two industry working groups (covering the Subscription Market and Non-subscription Market), overseen by an industry Steering Group which includes the Chairs of the working groups and representation from insurance brokers and insureds. Through these industry working groups, the market now has an agreed definition of contract certainty and put in place market Codes and Guidance to assist market participants in achieving contract certainty. It has also been monitoring progress towards achieving contract certainty – in the case of the Subscription Market, progress against targets it has set itself.

  4. In parallel with the market's own work, the FSA has been working on its options for regulatory intervention, should the market solution not succeed. Details of these options were presented at the meeting with the market in December 2005.

    Public record of the meeting held in December 2005

Progress

  1. On 20 March 2006, the FSA announced that it has suspended its work to develop rules to bring about contract certainty in the insurance market. Speaking at the FSA's Insurance Sector Conference, John Tiner acknowledged the progress made by the insurance market in meeting the FSA's challenge to achieve contract certainty and said: "To demonstrate our good faith in the market's ability to reach its goal, we will not be pressing ahead with our work on the contingency plan of regulatory intervention. We are putting it on the back-burner, although we are not taking it off the stove altogether".

    Full text of speech

  2. The announcement followed the receipt of data from the market showing that it had exceeded its own targets and expectations for achieving improvements in contract certainty at the end of 2005. The FSA noted the assurances from the Market Steering Group that, based on its data, it believes the market is on track to deliver contract certainty by the end of 2006.

  3. A further assessment of progress will be made by the FSA in the second quarter of this year, at which time further data will be available from the market. In the meantime, the FSA will continue to oversee and facilitate progress and remains ready to consult on the options for regulatory intervention should progress falter.

  4. At the meeting on 21 March, the FSA urged the market to maintain the momentum that has been gained to date and outlined a number of areas on which the market should focus in the important months ahead.

Areas for market focus

  1. The Subscription Market is encouraged to consider whether to stretch the targets it has set itself over the rest of the year (60% of contracts in June, 85% in December), and/or to consider other interim targets. The market agreed to consider this further.

  2. The FSA emphasised the need for further analysis of the type of transactions which are likely to fall within the remaining 15% at the end of the challenge, noting that it would be difficult to conclude that the challenge had been met if this 15% constituted a significant proportion of insurance contracts by value or complexity, or if a significant number of market participants fell short of the market's overall progress.

  3. Both the Subscription and Non-subscription Markets are encouraged to analyse outliers and reasons for firms failing contract certainty standards. The FSA offered to assist the market in addressing areas of resistance by groups of firms and noted that it had the ability to use its existing regulatory tools to identify and deal with those firms whose progress continued to lag behind that of the rest of the market.

  4. The FSA noted the importance of reducing the extent of legacy issues following the recent issuance of the Legacy Code of Practice.

  5. The FSA acknowledged AIRMIC's plans to present the UK's contract certainty initiative to its US and European counterparts, agreeing that this is a powerful way to engage and influence behavioural change of buyers of insurance from overseas jurisdictions.

  6. The FSA said it would continue to raise contract certainty in its discussions with overseas regulators - in the US, Europe and other key markets.

Conclusions

  1. It was agreed that a further meeting would take place in June/July 2006.

 

Attendees

FSA

John Tiner – Chief Executive Officer
Hector Sants – Managing Director, Wholesale Business Unite
David Strachan – Insurance Sector Leader
Tom Heurtas, Director, Wholesale Firms Division
Amanda Bowe – Insurance Sector Team
Ambika Siva, Lloyd's Team

Market Steering Group:

Dane Douetil - Brit
Andrew Cornish, AIRMIC
Steve Matanle, Marsh
Duncan Boyle - RSA

Trade Associations

David Hough, LMBC
Simon Sperryn, LMA
Dave Matcham, IUA
Eric Galbraith, BIBA

Insurers

Tony Medniuk, Global Aerospace
Steve Quiddington, Lloyds
Dan Glaser, AIG
Clive Wood, RSA
Lotfii Baccouche, Chubb
Michael Furgueson, ACE European Group
David Martin - Zurich
Chris Smith, Limit
Sue Langley, Hiscox
Philippe Regazzoni, Swiss Re

Brokers

Dominic Burke, JLT Group
Nigel Roberts, Aon
Dennis Mahoney, Aon
Richard Borgonon, Agnew Higgins Pickering
Richard Bucknall, Willis

Service providers

Alex Letts, ri3k
Malcolm Forbes-Wilson, Xchanging