Regulation  

Six key issues from UK-wide FCA advice risk review

Six key issues have so far been identified by the Financial Conduct Authority from a business risk review that has assessed 5,000 firms across seven UK regions including the need for affordability assessments for protection products, according to a Chartered Insurance Institute member body.

The Insurance Institute of Cardiff identified the areas in an email to its member firms across the Wales/Severn region, seen by FTAdviser, ahead of the latest leg of the regulator’s nationwide review.

All of the 900 advice and general insurance firms in the region have been invited to attend workshops in preparation for a review, as the region becomes the eighth to come under the spotlight as part of its four-year ‘business risk awareness review’.

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IIC said that from the 5,000 plus firms that have already been assessed across Scotland, north-west England, the Midlands and much of London, the main issues highlighted include:

• management involvement and commitment to ensuring compliance with regulatory requirements;

• collection, analysis and use of management information;

• demonstrating the suitability of advice;

• robust affordability assessment for protection products;

• recruitment process and training and competence; and

• financial matters - solvency and client money.

Speaking to FTAdviser, an FCA spokesperson said it will be hosting ‘business risk awareness’ workshops in March before the regulatory reviews are conducted.

The FCA said the workshops will look into what to expect if a firm faces a regulatory review; how risks to the firm and customers are identified and managed; what good governance should look like; the importance of accurate and timely financial reporting; and how to apply prudential management.

Following this a number of firms will be invited for a regulatory review that will either take the form of a two-hour face-to-face interview, a telephone interview or a three to four-hour online assessment.

The regulator added that the fact a particular firm receives a particular type of review is “no good or bad reflection on them but rather that we are using our resources in the most appropriate way”.

This review aims to look across a firm and measure the effectiveness of senior management in identifying and addressing risks and the controls in place, the FCA said. It will also look at the financial soundness of the firm and its ability to continue to provide products and services to customers.

After the assessment one in five firms will also face a more intensive on-site ‘verification visit’, the IIC added.

To help prepare organisations for these reviews, the Insurance Institute of Cardiff will be delivering a half-day masterclass to help provide delegates with advice.

The FCA confirmed to FTAdviser that Wales is the eighth of 12 legs, which will be conducted over four years in total. The last roadshow will be in summer 2015.