In May 2017, the Financial Conduct Authority (FCA) published a consultation paper (Proposed Guidance on the FCA’s Approach to the Review of Part VII Insurance Business Transfer, GC17/5) which contains draft guidance on how the FCA proposes to review applications for transfers of insurance business under Part VII of the Financial Services and Markets Act 2000 (Part VII Transfer).
It also sets out the FCA’s expectations of the parties and the independent expert (Consultation Paper). The draft guidance is intended to be read alongside Chapter 18 of the Supervision Manual in the FCA’s Handbook and also the Prudential Regulation Authority’s (PRA) April 2015 statement of policy setting out the PRA’s approach to insurance business transfers.
The Consultation Paper was published in order to assist practitioners, insurers and independent experts to understand the FCA’s approach to and requirements for a Part VII Transfer. The FCA acknowledges that the PRA takes the lead in Part VII Transfers (in accordance with the Memorandum of Understanding between the FCA and PRA) but recognises that both regulators have specific roles in the process. The PRA leads the process and has responsibility for approving the appointment of an independent expert, approving notices and issuing the necessary certificates; the FCA, however, has an active role in the process and must be consulted by the PRA at all stages, including court hearings, where it provides its own assessment of the Part VII transfer to the Court. The FCA acknowledges that each Part VII Transfer has to be considered on its own merits and expects to take a proportionate approach in its assessment of an application.
The draft guidance covers the following: (i) matters which need to be addressed at the initial application stage; (ii) appointment of the independent expert; (iii) the FCA’s role, approach and key considerations; (iv) details of the key documents; and (v) factors which are taken into account when applications are made for dispensations from certain requirements in Part VII Transfers.
Applicants are expected to contact the FCA and the PRA at an early stage. The nominated independent expert must demonstrate independence, sufficient skills, experience and resources. The FCA will also address the business rationale for the transfer of business including due consideration of regulatory and competition issues, changes affecting policyholders and other unresolved issues.
The Consultation period is open until 15 August 2017. A link to the Consultation Paper can be found here.