In August 2016, the FCA released a statement providing an updated on Consultation Paper 12/20 (“Consultation 12/20”)
The purpose of Consultation 12/20, held in August 2012, was to review the rules on holding client money applicable to general insurance intermediaries. The FCA discovered various issues of concern during its review of CASS 5, including ineffective risk transfer documentation, infrequent client money calculations and inappropriate controls regarding the use of non-statutory trusts.
Outcome: No Changes to CASS 5
Comments on Consultation 12/20 were requested by November 2012, but no policy statement was released. On 16 August 2016, the FCA produced a Statement on Consultation 12/20, noting that since Consultation 12/20 was published, the industry has been more focussed on protecting client money and engaging with FCA policy.
There are a few particular initiatives which the FCA believes are leading to improvements, including:
- its more proactive CASS outreach strategy when supervising general insurance intermediaries; and
- an updated client money reporting requirement for intermediaries that hold client money.
The feedback from Consultation 12/20 has led the FCA to reconsider its proposed rule changes, and it has concluded that it would not be appropriate to go ahead with them at this time. The existing CASS 5 rules will therefore remain in place, and the FCA will not implement any rule changes to CASS 5 without holding a new consultation. General insurance intermediaries operating under risk transfer agreements or holding client money must continue to comply with the existing CASS 5 rules.