Insurance Regulation Omnibus Consultation Paper (2018-04-17)

Summary

This is a Guernsey Financial Services Commission consultation paper proposing a package of revisions to rules and guidance for insurers licensed under the Insurance Business (Bailiwick of Guernsey) Law, 2002. The changes are intended to align Guernsey's insurance regulatory framework with updated IAIS Insurance Core Principles. The paper is open for public comment and none of the proposals are yet in force.

• Public disclosure: Proposes requiring licensed insurers and reinsurers (except Category 5 captives and Special Purpose Insurers) to publish audited financial statements and additional information electronically, consistent with ICP 20.
• Reinsurance and risk transfer: New guidance consistent with ICP 13 would clarify expectations for reinsurance programmes forming part of an insurer's risk management framework, applying to all licensed insurers and reinsurers.
• Conduct of business: Proposes withdrawing the existing Codes of Conduct and replacing them with new Rules covering fair treatment of customers, conflicts of interest, product development, marketing, claims handling and complaints, applying to Category 1 (Commercial Life) and Category 3 (Commercial General) insurers writing retail business.
• ORSA scope: Proposes lowering size thresholds so more insurers (estimated 10, plus about 8 with significant retail bases) fall within the full Own Risk and Solvency Assessment requirement, and adding requirements for forward-looking stress testing and contingency planning.
• Reporting frequency: Proposes moving to semi-annual solvency reporting for insurers subject to the full ORSA.
• Category 6 Special Purpose Entities: New guidance would clarify qualifying criteria, ownership restrictions, minimum capital (generally £100,000) and 'fully funded' requirements for Category 6 insurers or cells.
• Majority shareholder controller: New guidance would require insurers to notify the Commission in writing as soon as they become aware of a proposal for an existing shareholder controller to become a majority shareholder controller.

Where proposals are adopted, most new or amended rules are expected to take effect from 9 July 2018, with a six month transitional period allowing insurers to achieve full compliance by 1 January 2019. The Commission will issue feedback and finalised rules and guidance in July 2018 following the consultation.

Key obligations

• Stakeholders wishing to comment on the proposals must submit responses to the Commission by 29 May 2018.
• If adopted, affected insurers would need to publish audited financial statements and specified additional information electronically under the revised Public Disclosure Rules.
• If adopted, Category 1 and Category 3 insurers writing retail business would need to comply with new Conduct of Business Rules covering fair treatment, conflicts of interest, product development, promotion, customer information, policy servicing, claims handling and complaints.
• If adopted, insurers newly brought within scope of the full ORSA would need to conduct forward-looking stress testing and maintain a contingency plan for going and gone concern situations.
• If adopted, insurers subject to the full ORSA would need to file solvency reports semi-annually instead of annually.
• If adopted, Category 6 insurers or cells would need to meet new ownership eligibility criteria and maintain minimum paid-up capital (generally £100,000) unless a robust contingency funding plan is agreed with the Commission.
• If adopted, licensed insurers would need to notify the Commission in writing as soon as they become aware of a proposal for an existing shareholder controller to become a majority shareholder controller.

Applies to

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

Deadlines

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