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Dear CEO | Release Date: 12th October 2021

To read a longer summary of this Dear CEO letter, click here.

To access the original FCA document, click here.

Short Summary

The Financial Conduct Authority (FCA) has issued a supervisory strategy update to Lloyd’s & London Market Insurers (LLM), highlighting persistent risks and setting expectations for improved consumer outcomes. The FCA stresses the necessity for firms to rigorously assess their practices to align with regulatory standards that emphasise fair treatment and market integrity.

The letter outlines key focus areas: ensuring products offer genuine value, fair and efficient claims handling, robust operational resilience, clarity in insurance cover terms, promoting a healthy firm culture, and ensuring accessibility of business lines. The FCA is concerned with products’ ability to meet consumer needs and the fairness of claims processes, particularly highlighted by challenges in business interruption insurance.

Operational resilience is crucial, especially with increased digitalisation and third-party services, to protect against disruptions and consumer data breaches. The FCA also urges clarity in insurance contracts to prevent disputes and expects firms to foster an ethical culture and inclusive workforce.

Firms are directed to comply with new pricing practices rules and the upcoming Consumer Duty, which requires financial products and services to be fit for purpose and offer fair value. Compliance will be monitored through proactive governance and ongoing product impact assessments.

Key take-away:

LLM insurers must thoroughly review and adapt their business strategies and risk management to meet FCA standards, ensuring their operations benefit consumers authentically. Firms should engage regularly with FCA updates and prepare for strict supervision, with potential regulatory actions for non-compliance.

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