The Financial Conduct Authority (FCA) has written to Lloyd’s and London market intermediaries and managing general agents (LLMI firms) setting out its views about the key risks those firms could pose to the customers in the markets that they operate in.
The letter, signed by Charlotte Cross, FCA Head of Wholesale General Insurance, details the regulator’s supervisory strategy for firms grouped by business model in its LLMI firms’ portfolio for the period to November 2021. The FCA says its overarching aim in supervising LLMI firms is to enable a wholesale market that works well for its participants and customers, and preserves the integrity of the markets.
The FCA sets out its expectations for firms in those markets noting: ‘We want firms to behave ethically and responsibly in the way they treat their customers, their employees and their counterparties.’
Firms had been provided with sufficient information to help them do so, the FCA argued. It cited, its Wholesale Insurance Broker Market Study (MS17/2.2) from February 2019 which identified certain areas warranting further action, including conflicts of interests emanating from remuneration practices that intermediaries in the distribution chain employ. ‘We also recognise that the market requires modernisation and careful monitoring to ensure that the interaction between brokers and underwriting capacity does not become dysfunctional’, the letter continued.
BIBA members active in these markets are encouraged to read the letter in full and can access the document by clicking here.
Recipients of the portfolio letter are expected to consider the extent of the risks in their business and assess strategies they have in place mitigate those risks.
Unsurprisingly, there is a lot of overlap between the content in this letter and the one that the FCA sent to personal and commercial lines intermediaries in September 2020