Appointed Reps - FCA Thematic Review

The FCA have recently published a thematic review on Principals and their Appointed Reps. The focus was on general insurance products and services provided primarily to UK retail and SME customers. The initial stage of the review included a survey of 190 principals in the general insurance sector with a diverse range of business models operating a network of appointed representatives. 

The FCA then selected 15 of these principal firms for more detailed work and requested and reviewed further information from these firms. Finally, they visited 14 principals and 25 of their ARs; meeting with and interviewing senior management and staff, reviewing policies, procedures, contractual documentation, customer facing documentation and customer files, and listening to sales calls.
Unfortunately, the outcome of the review was not good. The FCA expect principals to be able to demonstrate that they consistently comply with their regulatory obligations to: 
  • Consider the impact of ARs on their own business model and ability to meet threshold conditions
  • Assess the solvency and suitability of their ARs
  • Take reasonable steps to put in place an appropriate risk management framework to identify and manage the risks ARs present to their business
  • Put in place compliant contractual arrangements with their ARs
  • Have adequate controls over their ARs’ regulated activities for which the principal has responsibility, and
  • Have adequate resources in place to monitor and enforce compliance with the relevant requirements that apply to the regulated activities for which the principal is responsible. 
The FCA note that the principal firm’s regulatory obligations to control their ARs’ activities are no less than for the principal’s own activities, so they expect their controls and oversight to encompass all elements of the ARs’ activities, including ensuring the sales activities are compliant with PRIN and ICOBS. 
They expect principals to be able to demonstrate that they are consistently meeting the regulatory requirements so that their customers who receive products and services delivered by the ARs are consistently being treated fairly and receiving appropriate outcomes.
While this review was focused on the general insurance sector, the findings may also be applicable to principals and ARs operating in other sectors of the UK financial services industry. They expect all principals to consider the findings in this report and to take appropriate action, where applicable, to address the issues that are relevant to them.


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