The Isle of Man Financial Services Authority today has published its 2017 “Roadmap” for updating the Isle of Man’s regulatory framework for insurance business, in which it reveals that a final draft of a much-discussed, wide-ranging new Conduct of Business Code for IoM life insurance companies is due to be issued in April.
The scheduled implementation date for the new Conduct of Business Code, which will set out how IoM insurance companies will be expected to handle business they receive from intermediaries, is 1 January 2018, the Roadmap document reveals.
This implementation will take place “with a transitional period, to implement the requirement for a ‘Key Information Document’ , which includes policyholder-specific disclosures coming into operation on 1 January 2019,” the Roadmap document explains.
“This reflects feedback from industry in respect of preparing the intermediary market and carrying out necessary systems development.”
The 28-page Roadmap document details other planned changes as well for the island’s life as well as non-life insurance sectors, including an updated, “more fully articulated, risk-based capital and solvency regime”.
Also included as part of today’s publication of the 2017 Roadmap for Updating the Isle of Man’s Regulatory Framework for Insurance Business is a consultation paper “on conduct of business for non-life insurers”, which is said to put forward proposals for the non-life insurance sector that have been based on certain themes set out in a 2014 discussion paper.
Developments in int’l insurance regulatory standards
Today’s Roadmap is the latest in a series of similar documents and consultations that the IoM FSA and its predecessor regulatory bodies, the Insurance & Pensions Authority and Financial Supervision Commission, have brought out in recent years in an effort “to take account of developments in international insurance regulatory standards”. The first such “Roadmap” for “significantly updating” the island’s insurance industry framework was published in 2013.
The changes are seen as necessary, as the Roadmap points out, in order to respond to “significant” changes that international insurance supervision standards have been undergoing recently, which, it notes, continue to pose “a challenge to all jurisdictions, including the Isle of Man”.
The need to make changes took on fresh urgency after the International Association of Insurance Supervisors (IAIS) substantially updated its Insurance Core Principles, or ICPs, in October 2011, in response to developments in the marketplace at that point, some of which had been precipitated by the global financial crisis that began in 2007, according to the Roadmap.
Key issues the IoM FSA has indicated it is interested in is how insurers choose the intermediaries they choose to do business with, and how they might be incentivised to ensure that the investment products – such as investment funds – that are carried in their bonds are appropriate for the individual policyholder in question, and intended for retail investors like them. How clients are informed of what the insurance products they buy will cost them, particularly with respect to commission and other inducements, is another area of concern.
Says the Roadmap document: “The Insurance Core Principles expect the supervisory framework to require insurers to embed the fair treatment of customers into their business culture, and to implement policies and procedures which reflect fair treatment as a key strategic objective.”
The Isle of Man is home to a number of major life company insurance businesses, including RL360°, Hansard, Canada Life International, Friends Provident International, AXA, Old Mutual International and Zurich International Life. Of these, Canada Life and AXA sell their products into the UK market only, while the others sell internationally as well, or instead.
Not into all overseas markets, though: because the Isle of Man isn’t considered to be in Europe, companies located there aren’t officially permitted to “passport” financial services and products across borders into the EU, the way that companies based in, for example, Dublin or Luxembourg are able to, although they are able to sell into the UK market.
Gillian Marples, chair of the Manx Insurance Association, which represents the island’s insurance companies, said the association “welcomed” the latest Roadmap update, “as it provides confirmation regarding implementation timeframes for a number of key Conduct of Business developments”.
“The MIA have been requesting this clarification to allow members sufficient time to plan for regulatory change and to work with advisers to introduce new requirements,” she added.
“The time frames outlined in the update are in line with discussions between the MIA and the Isle of Man Financial Services Authority, and confirm the phased introduction of commission disclosure, which means that client specific Key Information Documents (KIDs) will not be required until 1 January 2019.”
One Isle of Man insurance figure who has spoken positively in the past about the island’s plans to update its insurance regulations has been RL360° chief executive David Kneeshaw.
Today he told International Investment: “This announcement brings another level of clarity to the process, and is therefore good news.
“We now have a clear sense of direction, of timing and more detail.
“The result will be a stronger regulatory framework, which will benefit advisers and customers, and [will] place the Isle of Man firmly amongst those countries offering good governance.
“Islands with a lesser framework will soon be seen as ‘dodgy’, and they and the firms based in them will be the losers.”
Steve Weston, managing director of Friends Provident International in the Isle of Man, as well as chief operating officer of FPI, said FPI “welcome[s] the further clarity provided by the Isle of Man FSA’s Roadmap”.
“The measures to ensure all customers receive clearly set out information in the KID format will help to create transparency for customers throughout the process, from product features and charges to commission being paid,” he added.
“After over 35 years at the heart of offshore business here, we remain committed to the Isle of Man, and support measures which demonstrate the Isle Man’s status as a well regulated jurisdiction.”
To read and download the Roadmap from the Isle of Man regulator’s website, click here.
To read and download the consultation paper on “Conduct of Business for non-life insurance (CP17-01/T01)”, click here. Responses are due by 14 March.
Also available on the IoM FSA’s website today is a document containing responses to feedback received on a Managing Conflicts of Interest in the Insurance Sales Process (Long-term business) consultation, here; as well as a summary of responses to feedback received on the consultation on the Insurance (Amendment) Bill (CP15-05), carried out in 2016.