Insurance Regulation Omnibus Consultation (April 2018)

Summary

This is a consultation paper issued by the Guernsey Financial Services Commission (GFSC) proposing a package of changes to the Rules and Guidance applicable to licensed insurers, intended to align Guernsey's regime with updated IAIS Insurance Core Principles. It invites industry comment on proposed revisions across six distinct regulatory areas before any rules are finalised.

• Public Disclosure: Proposes requiring most licensed insurers and reinsurers to publish audited financial statements and additional information (e.g. corporate governance features) electronically; Category 5 (Captive) and Special Purpose Insurers would be exempt.
• Reinsurance and Risk Transfer: New non-binding guidance clarifying expectations that reinsurance programmes form part of an insurer's wider, governed risk management framework, consistent with ICP 13.
• Conduct of Business: Proposes withdrawing the existing Licensed Insurers' Code of Conduct and the Code of Conduct for Insurers Conducting Long-Term Business, replacing them with new Rules covering fair treatment of customers, conflicts of interest, intermediary dealings, product development, promotion, customer information, policy servicing, claims handling and complaints. Would apply to Category 1 (Commercial Life) and Category 3 (Commercial General) insurers writing retail business.
• ORSA (Own Risk and Solvency Assessment): Proposes lowering the MCR thresholds that trigger the full ORSA requirement (rather than the limited OSCA), bringing an estimated additional 10 insurers into scope, plus notifying insurers with significant retail bases individually; also proposes clarified requirements for forward-looking stress testing and contingency planning.
• Solvency Reporting Frequency: Proposes moving insurers subject to the full ORSA to semi-annual (twice yearly) solvency reporting instead of annual.
• Category 6 Special Purpose Entities: New guidance proposed to clarify qualifying criteria for a non-SPI insurer or cell to qualify as a Category 6 (Special Purpose Entity) under the Solvency Rules.
• Majority Shareholder Controller: New guidance proposed requiring notification to the Commission where a change in majority control of an insurer is planned.

The Commission asked for comments on all proposals by 29 May 2018, after which it intended to issue feedback along with finalised rules and guidance, targeted for July 2018. Several proposals indicated an intended effective date of 9 July 2018 with a six month transitional period to full compliance by 1 January 2019, though these dates and the underlying rules were proposals subject to consultation, not yet confirmed as final at the time of this paper.

Key obligations

• Insurers and other stakeholders wishing to respond to the consultation must submit comments to the Commission by 29 May 2018.
• If adopted as proposed, all licensed insurers and reinsurers (excluding Category 5 Captive and Special Purpose Insurers) would need to publish audited financial statements and specified additional information electronically.
• If adopted, Category 1 (Commercial Life) and Category 3 (Commercial General) insurers writing retail business would need to comply with new Conduct of Business Rules covering fair treatment, conflicts of interest, product development, customer information, policy servicing, claims handling and complaints.
• If adopted, insurers newly brought into scope of the full ORSA (via lowered MCR thresholds or individual notification for significant retail bases) would need to conduct a full ORSA including forward-looking stress testing and contingency planning, rather than the limited OSCA.
• If adopted, insurers subject to the full ORSA would need to submit solvency reports semi-annually instead of annually.
• If adopted, insurers proposing a change in majority shareholder control would need to notify the Commission in advance under the new guidance.

Applies to

licensed insurers, licensed reinsurers, Category 1 (Commercial Life) insurers, Category 2 insurers, Category 3 (Commercial General) insurers, Category 4 insurers, Category 5 (Captive) insurers, Category 6 (Special Purpose Entity) insurers, Special Purpose Insurers, Protected Cell Companies

Deadlines

• 29 May 2018: Deadline for submitting comments on the consultation paper to the Commission.
• 9 July 2018: Proposed effective date for the revised Public Disclosure Rules, Reinsurance and Risk Transfer guidance, and new Conduct of Business Rules.
• 1 January 2019: End of proposed six month transitional period for full compliance with the amended Public Disclosure Rules and new Conduct of Business Rules.
• July 2018: Indicative timing for the Commission to issue feedback on consultation responses together with resulting new and amended rules and guidance.