We were very grateful to welcome Tim Pither and Chris Pask from the FSA to our latest CIMIRF meeting held on 17 May in Leeds, chaired by the North Regional Chairman Rod Hepple-Wilson and hosted and organised by Anthony Smith our South West Regional Chairman who gratefully acknowledges the assistance of his colleagues in Leeds for making the event possible.

Tim Pither began by outlining some of the work the FSA is involved with during the first few months of general insurance regulation. His department is in the Retail Firms Division (Department D) and is the lead department for mortgage and insurance regulation. Half of the staff come from the mortgage and insurance sector and their current task is to sort out and get to know the newly regulated population. Much of this is being done through ARROW style visits to medium and large sized firms looking at corporate governance, strategy, systems and controls and financial soundness. Clive Briault has made it clear he will hold senior management to account.

Mortgage disclosure work is coming to an end and the FSA will publish its ‘Dear CEO’ letter on the website tomorrow 18 May. GI disclosure work continues and FSA are looking at the sale of Personal Protection Insurance (PPI) products and conflicts of interest. Work continues on networks especially their control of appointed representatives in the new general insurance and mortgage networks continue. Treating customers fairly and the product risk framework and ICAS for general insurers are ongoing. FSA aim to provide a couple of open days at the end of the year to discuss their findings.

Crystallised risks are beginning to emerge already in the last two months and dealing with this takes away from the proactive work the FSA want to do. Integrated regulatory reporting is also a major work stream.

Asked about PPI Tim Pither confirmed the scooping work for this was in its very early stages. The board are looking at it and there has been a great deal of publicity lately. Another question was raised on the work on conflicts of interest and a number of one-day visits to a sample of firms to see how conflicts are being identified and managed are taking place. This is purely about findings of best practice and is based on the Principles. FSA are looking at any sort of conflict within the firm including the classic impact of commission and bonuses and the risk of selling unsuitable products.

Chris Pask went on to give an overview of regulatory reporting. A pilot exercise took place on RMAR and MLAR and around 40 firms responded rating them between 1 – 5 poor to excellent with the mean score being 3.7. They were user friendly and submission was easy although there have been some problems with printing. Firms also need to ensure they have a 5.5 browser or higher or a 7.1 netscape or higher system to operate the software. There is no automatic calculation of totals and in answer to a question Chris confirmed there is no intention to provide this, as firms should calculate their own totals. The system is still due to go live on 1 July although the printing problem may take longer to resolve.

In response to a question Chris Pask confirmed the Complaints return would become part of RMAR. A further point made by the audience was about the disparity between what firms expected to provide and what the FSA expect to receive. A further question around freedom of information, how long records would be kept by FSA and the overall sponsor of the reporting project will be taken back and answered later although they believe David Kenmir as head of regulatory services would have overall responsibility for the project. A request for a copy of the presentation used in the pilot study was made and this will be provided and posted to the website.

The list of CIMIRF questions then followed and a lively debate took place. Perimeter regulation came up including the widespread ignorance amongst many solicitors of their obligation to be regulated. The perennial problem of differing requirements from FOS and FSA came up. FOS wanted items in the policy summaries to defend against complaints whilst FSA are looking for shorter documents; good practice would be about 5 pages. A request for a definitive document setting FSA regulatory reporting requirements was made. The problems of overseas outsourcing and territorial scope another topic. More details will be published on the website in due course.

With a range of people making their way to Leeds from Edinburgh a future event in that area seems likely but watch this space for further details.