Today’s FCA thematic review paper on the use of delegated authorities by insurers reports that the FCA has discovered shortcomings in insurers’ systems and controls in respect of third parties who bind risks on their behalf. In regulatory terminology, this counts as “outsourcing”.
Earlier this week, figures were published showing that the FCA has commissioned 29 Section 166 Skilled Person reviews in the six months from October 2014 to April 2015, at an undisclosed cost to the firms involved (the FCA itself will know, as such instructions are almost always awarded on a fixed-fee basis). In regulatory terminology, this does not count as “outsourcing”.
The FCA has been focussed for a while upon insisting that insurers adopt a more hands-on approach to selecting and overseeing their outsourced service providers, with one eye on the interests of customers at all times. Further, it has demonstrated by enforcement action that it intends to hold firms responsible for any shortcomings in their outsourced partners’ systems and controls. With today’s publication, the regulator is banging a very familiar drum.
Could firms be forgiven for wondering whether, in the aggressive tender process that it runs for Section 166 reviews, the FCA applies the same standards to itself?