{"id":14017,"date":"2024-01-05T11:55:35","date_gmt":"2024-01-05T11:55:35","guid":{"rendered":"https:\/\/thefinancialeducation.co.uk\/?p=14017"},"modified":"2026-02-10T16:49:16","modified_gmt":"2026-02-10T16:49:16","slug":"405af-session-22","status":"publish","type":"post","link":"https:\/\/thefinancialeducation.co.uk\/index.php\/2024\/01\/05\/405af-session-22\/","title":{"rendered":"405AF: Session 22"},"content":{"rendered":"\n<p><\/p>\n\n\n\n<p><strong>Financial Markets &amp; Regulation: The Prudential Regulation Authority (PRA)&#8217;s Approach to Small Insurers<\/strong><br><\/p>\n\n\n<style>.kt-accordion-id14017_72aebe-35 .kt-accordion-inner-wrap{column-gap:var(--global-kb-gap-md, 2rem);row-gap:10px;}.kt-accordion-id14017_72aebe-35 .kt-accordion-panel-inner{border-top:0px solid transparent;border-right:0px solid transparent;border-bottom:0px solid transparent;border-left:0px solid transparent;background:#ffffff;padding-top:var(--global-kb-spacing-sm, 1.5rem);padding-right:var(--global-kb-spacing-sm, 1.5rem);padding-bottom:var(--global-kb-spacing-sm, 1.5rem);padding-left:var(--global-kb-spacing-sm, 1.5rem);}.kt-accordion-id14017_72aebe-35 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header{border-top-color:#555555;border-top-style:solid;border-right-color:#555555;border-right-style:solid;border-bottom-color:#555555;border-bottom-style:solid;border-left-color:#555555;border-left-style:solid;border-top-left-radius:6px;border-top-right-radius:6px;border-bottom-right-radius:6px;border-bottom-left-radius:6px;background:#f2f2f2;font-size:18px;line-height:24px;color:#555555;padding-top:14px;padding-right:16px;padding-bottom:14px;padding-left:16px;}.kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basiccircle ):not( .kt-accodion-icon-style-xclosecircle ):not( .kt-accodion-icon-style-arrowcircle )  > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap .kt-blocks-accordion-icon-trigger:after, .kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basiccircle ):not( .kt-accodion-icon-style-xclosecircle ):not( .kt-accodion-icon-style-arrowcircle )  > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap .kt-blocks-accordion-icon-trigger:before{background:#555555;}.kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-blocks-accordion-icon-trigger{background:#555555;}.kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-blocks-accordion-icon-trigger:after, .kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-blocks-accordion-icon-trigger:before{background:#f2f2f2;}.kt-accordion-id14017_72aebe-35 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header:hover, \n\t\t\t\tbody:not(.hide-focus-outline) .kt-accordion-id14017_72aebe-35 .kt-blocks-accordion-header:focus-visible{color:#444444;background:#eeeeee;border-top-color:#eeeeee;border-top-style:solid;border-right-color:#eeeeee;border-right-style:solid;border-bottom-color:#eeeeee;border-bottom-style:solid;border-left-color:#eeeeee;border-left-style:solid;}.kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basiccircle ):not( .kt-accodion-icon-style-xclosecircle ):not( .kt-accodion-icon-style-arrowcircle ) .kt-accordion-header-wrap .kt-blocks-accordion-header:hover .kt-blocks-accordion-icon-trigger:after, .kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basiccircle ):not( .kt-accodion-icon-style-xclosecircle ):not( .kt-accodion-icon-style-arrowcircle ) .kt-accordion-header-wrap .kt-blocks-accordion-header:hover .kt-blocks-accordion-icon-trigger:before, body:not(.hide-focus-outline) .kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basiccircle ):not( .kt-accodion-icon-style-xclosecircle ):not( .kt-accodion-icon-style-arrowcircle ) .kt-blocks-accordion--visible .kt-blocks-accordion-icon-trigger:after, body:not(.hide-focus-outline) .kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basiccircle ):not( .kt-accodion-icon-style-xclosecircle ):not( .kt-accodion-icon-style-arrowcircle ) .kt-blocks-accordion-header:focus-visible .kt-blocks-accordion-icon-trigger:before{background:#444444;}.kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-accordion-header-wrap .kt-blocks-accordion-header:hover .kt-blocks-accordion-icon-trigger, body:not(.hide-focus-outline) .kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-accordion-header-wrap .kt-blocks-accordion-header:focus-visible .kt-blocks-accordion-icon-trigger{background:#444444;}.kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-accordion-header-wrap .kt-blocks-accordion-header:hover .kt-blocks-accordion-icon-trigger:after, .kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-accordion-header-wrap .kt-blocks-accordion-header:hover .kt-blocks-accordion-icon-trigger:before, body:not(.hide-focus-outline) .kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-accordion-header-wrap .kt-blocks-accordion-header:focus-visible .kt-blocks-accordion-icon-trigger:after, body:not(.hide-focus-outline) .kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-accordion-header-wrap .kt-blocks-accordion-header:focus-visible .kt-blocks-accordion-icon-trigger:before{background:#eeeeee;}.kt-accordion-id14017_72aebe-35 .kt-accordion-header-wrap .kt-blocks-accordion-header:focus-visible,\n\t\t\t\t.kt-accordion-id14017_72aebe-35 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header.kt-accordion-panel-active{color:#ffffff;background:#f3690e;border-top-color:#f3690e;border-top-style:solid;border-right-color:#f3690e;border-right-style:solid;border-bottom-color:#f3690e;border-bottom-style:solid;border-left-color:#f3690e;border-left-style:solid;}.kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basiccircle ):not( .kt-accodion-icon-style-xclosecircle ):not( .kt-accodion-icon-style-arrowcircle )  > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header.kt-accordion-panel-active .kt-blocks-accordion-icon-trigger:after, .kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basiccircle ):not( .kt-accodion-icon-style-xclosecircle ):not( .kt-accodion-icon-style-arrowcircle )  > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header.kt-accordion-panel-active .kt-blocks-accordion-icon-trigger:before{background:#ffffff;}.kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-blocks-accordion-header.kt-accordion-panel-active .kt-blocks-accordion-icon-trigger{background:#ffffff;}.kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-blocks-accordion-header.kt-accordion-panel-active .kt-blocks-accordion-icon-trigger:after, .kt-accordion-id14017_72aebe-35:not( .kt-accodion-icon-style-basic ):not( .kt-accodion-icon-style-xclose ):not( .kt-accodion-icon-style-arrow ) .kt-blocks-accordion-header.kt-accordion-panel-active .kt-blocks-accordion-icon-trigger:before{background:#f3690e;}@media all and (max-width: 1024px){.kt-accordion-id14017_72aebe-35 .kt-accordion-panel-inner{border-top:0px solid transparent;border-right:0px solid transparent;border-bottom:0px solid transparent;border-left:0px solid transparent;}}@media all and (max-width: 1024px){.kt-accordion-id14017_72aebe-35 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header{border-top-color:#555555;border-top-style:solid;border-right-color:#555555;border-right-style:solid;border-bottom-color:#555555;border-bottom-style:solid;border-left-color:#555555;border-left-style:solid;}}@media all and (max-width: 1024px){.kt-accordion-id14017_72aebe-35 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header:hover, \n\t\t\t\tbody:not(.hide-focus-outline) .kt-accordion-id14017_72aebe-35 .kt-blocks-accordion-header:focus-visible{border-top-color:#eeeeee;border-top-style:solid;border-right-color:#eeeeee;border-right-style:solid;border-bottom-color:#eeeeee;border-bottom-style:solid;border-left-color:#eeeeee;border-left-style:solid;}}@media all and (max-width: 1024px){.kt-accordion-id14017_72aebe-35 .kt-accordion-header-wrap .kt-blocks-accordion-header:focus-visible,\n\t\t\t\t.kt-accordion-id14017_72aebe-35 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header.kt-accordion-panel-active{border-top-color:#f3690e;border-top-style:solid;border-right-color:#f3690e;border-right-style:solid;border-bottom-color:#f3690e;border-bottom-style:solid;border-left-color:#f3690e;border-left-style:solid;}}@media all and (max-width: 767px){.kt-accordion-id14017_72aebe-35 .kt-accordion-inner-wrap{display:block;}.kt-accordion-id14017_72aebe-35 .kt-accordion-inner-wrap .kt-accordion-pane:not(:first-child){margin-top:10px;}.kt-accordion-id14017_72aebe-35 .kt-accordion-panel-inner{border-top:0px solid transparent;border-right:0px solid transparent;border-bottom:0px solid transparent;border-left:0px solid transparent;}.kt-accordion-id14017_72aebe-35 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header{border-top-color:#555555;border-top-style:solid;border-right-color:#555555;border-right-style:solid;border-bottom-color:#555555;border-bottom-style:solid;border-left-color:#555555;border-left-style:solid;}.kt-accordion-id14017_72aebe-35 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header:hover, \n\t\t\t\tbody:not(.hide-focus-outline) .kt-accordion-id14017_72aebe-35 .kt-blocks-accordion-header:focus-visible{border-top-color:#eeeeee;border-top-style:solid;border-right-color:#eeeeee;border-right-style:solid;border-bottom-color:#eeeeee;border-bottom-style:solid;border-left-color:#eeeeee;border-left-style:solid;}.kt-accordion-id14017_72aebe-35 .kt-accordion-header-wrap .kt-blocks-accordion-header:focus-visible,\n\t\t\t\t.kt-accordion-id14017_72aebe-35 > .kt-accordion-inner-wrap > .wp-block-kadence-pane > .kt-accordion-header-wrap > .kt-blocks-accordion-header.kt-accordion-panel-active{border-top-color:#f3690e;border-top-style:solid;border-right-color:#f3690e;border-right-style:solid;border-bottom-color:#f3690e;border-bottom-style:solid;border-left-color:#f3690e;border-left-style:solid;}}<\/style>\n<div class=\"wp-block-kadence-accordion alignnone\"><div class=\"kt-accordion-wrap kt-accordion-id14017_72aebe-35 kt-accordion-has-10-panes kt-active-pane-0 kt-accordion-block kt-pane-header-alignment-left kt-accodion-icon-style-basic kt-accodion-icon-side-right\" style=\"max-width:1500px\"><div class=\"kt-accordion-inner-wrap\" data-allow-multiple-open=\"false\" data-start-open=\"none\">\n<div class=\"wp-block-kadence-pane kt-accordion-pane kt-accordion-pane-1 kt-pane14017_bce1fe-39\"><div class=\"kt-accordion-header-wrap\"><button class=\"kt-blocks-accordion-header kt-acccordion-button-label-show\" type=\"button\"><span class=\"kt-blocks-accordion-title-wrap\"><span class=\"kt-blocks-accordion-title\"><strong>Session Learning Outcomes<\/strong><\/span><\/span><span class=\"kt-blocks-accordion-icon-trigger\"><\/span><\/button><\/div><div class=\"kt-accordion-panel kt-accordion-panel-hidden\"><div class=\"kt-accordion-panel-inner\">\n<p>By the end of this session, you should be able to understand the approach of The PRA to Supervision for Smaller Insurers<\/p>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-pane kt-accordion-pane kt-accordion-pane-3 kt-pane14017_23f4c3-6f\"><div class=\"kt-accordion-header-wrap\"><button class=\"kt-blocks-accordion-header kt-acccordion-button-label-show\" type=\"button\"><span class=\"kt-blocks-accordion-title-wrap\"><span class=\"kt-blocks-accordion-title\"><strong>1. The PRA Approach to Supervision for Smaller Insurers<\/strong><\/span><\/span><span class=\"kt-blocks-accordion-icon-trigger\"><\/span><\/button><\/div><div class=\"kt-accordion-panel kt-accordion-panel-hidden\"><div class=\"kt-accordion-panel-inner\">\n<p><\/p>\n\n\n<style>.kt-tabs-id14017_7d1756-d6 > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;border-top-left-radius:0px;border-top-right-radius:0px;border-bottom-right-radius:0px;border-bottom-left-radius:0px;padding-top:20px;padding-right:20px;padding-bottom:20px;padding-left:20px;background:#ffffff;}.wp-block-kadence-tabs .kt-tabs-id14017_7d1756-d6 > .kt-tabs-title-list li{margin-top:0px;margin-right:8px;margin-bottom:0px;margin-left:0px;}.wp-block-kadence-tabs .kt-tabs-id14017_7d1756-d6 > .kt-tabs-title-list li:last-child{margin-right:0px;}.wp-block-kadence-tabs .kt-tabs-id14017_7d1756-d6 > .kt-tabs-title-list li .kt-tab-title, .wp-block-kadence-tabs .kt-tabs-id14017_7d1756-d6 > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title{line-height:1.4em;font-weight:regular;font-style:normal;border-top-width:0px;border-right-width:0px;border-bottom-width:0px;border-left-width:0px;border-top-left-radius:4px;border-top-right-radius:4px;border-bottom-right-radius:0px;border-bottom-left-radius:0px;padding-top:8px;padding-right:20px;padding-bottom:8px;padding-left:20px;border-color:#eeeeee;color:#222222;background:#eeeeee;}.wp-block-kadence-tabs .kt-tabs-id14017_7d1756-d6 > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title{margin-top:0px;margin-right:8px;margin-bottom:0px;margin-left:0px;}.wp-block-kadence-tabs .kt-tabs-id14017_7d1756-d6 > .kt-tabs-title-list li .kt-tab-title:hover, .wp-block-kadence-tabs .kt-tabs-id14017_7d1756-d6 > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title:hover{border-color:#eeeeee;color:#222222;background:#e2e2e2;}.wp-block-kadence-tabs .kt-tabs-id14017_7d1756-d6 > .kt-tabs-title-list li.kt-tab-title-active .kt-tab-title, .wp-block-kadence-tabs .kt-tabs-id14017_7d1756-d6 > .kt-tabs-content-wrap > .kt-tabs-accordion-title.kt-tab-title-active .kt-tab-title{border-color:#eeeeee;color:#ffffff;background:#0a6689;}.wp-block-kadence-tabs .kt-tabs-id14017_7d1756-d6{max-width:2000px;}@media all and (max-width: 1024px){.kt-tabs-id14017_7d1756-d6 > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;}}@media all and (max-width: 767px){.kt-tabs-id14017_7d1756-d6 > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;}}<\/style>\n<div class=\"wp-block-kadence-tabs alignnone\"><div class=\"kt-tabs-wrap kt-tabs-id14017_7d1756-d6 kt-tabs-has-6-tabs kt-active-tab-2 kt-tabs-layout-tabs kt-tabs-tablet-layout-inherit kt-tabs-mobile-layout-inherit kt-tab-alignment-left \"><ul class=\"kt-tabs-title-list\"><li id=\"tab-activity\" class=\"kt-title-item kt-title-item-1 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-activity\" data-tab=\"1\" class=\"kt-tab-title kt-tab-title-1 \"><span class=\"kt-title-text\">Activity<\/span><\/a><\/li><li id=\"tab-11theregulatoryframework\" class=\"kt-title-item kt-title-item-2 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-active\"><a href=\"#tab-11theregulatoryframework\" data-tab=\"2\" class=\"kt-tab-title kt-tab-title-2 \"><span class=\"kt-title-text\">1.1 The Regulatory Framework<\/span><\/a><\/li><li id=\"tab-12firmcategorisation\" class=\"kt-title-item kt-title-item-3 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-12firmcategorisation\" data-tab=\"3\" class=\"kt-tab-title kt-tab-title-3 \"><span class=\"kt-title-text\">1.2 Firm Categorisation<\/span><\/a><\/li><li id=\"tab-13thesupervisoryapproach\" class=\"kt-title-item kt-title-item-4 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-13thesupervisoryapproach\" data-tab=\"4\" class=\"kt-tab-title kt-tab-title-4 \"><span class=\"kt-title-text\">1.3 The Supervisory Approach<\/span><\/a><\/li><li id=\"tab-14regulatoryco-ordination\" class=\"kt-title-item kt-title-item-5 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-14regulatoryco-ordination\" data-tab=\"5\" class=\"kt-tab-title kt-tab-title-5 \"><span class=\"kt-title-text\">1.4 Regulatory Co-ordination<\/span><\/a><\/li><li id=\"tab-15communication\" class=\"kt-title-item kt-title-item-6 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-15communication\" data-tab=\"6\" class=\"kt-tab-title kt-tab-title-6 \"><span class=\"kt-title-text\">1.5 Communication<\/span><\/a><\/li><\/ul><div class=\"kt-tabs-content-wrap\">\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-1 kt-inner-tab14017_b77f11-06\"><div class=\"kt-tab-inner-content-inner\">\n<ul class=\"wp-block-list\">\n<li>Prepare a video (a PowerPoint file with sound and export it to a video format. Then, upload it to Padlet)<\/li>\n\n\n\n<li>How many firm categorisations are there under the PRA supervision?<\/li>\n\n\n\n<li>What is The Prudential Regulation Authority (PRA)&#8217;s Approach to Supervision for Small Insurers?<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n<div class=\"padlet-embed\" style=\"border:1px solid rgba(0,0,0,0.1);border-radius:2px;box-sizing:border-box;overflow:hidden;position:relative;width:100%;background:#F4F4F4\">\n<p style=\"padding:0;margin:0\"><iframe src=\"https:\/\/coventryunionline.padlet.org\/embed\/vbwyk41bq13jwt7v\" frameborder=\"0\" allow=\"camera;microphone;geolocation\" style=\"width:100%;height:300px;display:block;padding:0;margin:0\"><\/iframe><\/p>\n<div style=\"display:flex;align-items:center;justify-content:end;margin:0;height:28px\"><a href=\"https:\/\/padlet.com?ref=embed\" style=\"display:block;flex-grow:0;margin:0;border:none;padding:0;text-decoration:none\" target=\"_blank\" rel=\"noopener\"><\/p>\n<div style=\"display:flex;align-items:center;\"><img data-opt-id=1441106896  fetchpriority=\"high\" decoding=\"async\" src=\"https:\/\/padlet.net\/embeds\/made_with_padlet_2022.png\" width=\"114\" height=\"28\" style=\"padding:0;margin:0;background:0 0;border:none;box-shadow:none\" alt=\"Made with Padlet\"><\/div>\n<p><\/a><\/div>\n<\/div>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-2 kt-inner-tab14017_2f6537-38\"><div class=\"kt-tab-inner-content-inner\">\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>The PRA\u2019s statutory objectives:<\/strong>\n<ul class=\"wp-block-list\">\n<li>General objective:<br>\u201cpromoting the safety and soundness of PRA-authorised firms\u201d<\/li>\n\n\n\n<li>Insurance objective:<br>\u201ccontributing to the securing of an appropriate degree of protection for those who are or may become policyholders\u201d<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n<div class=\"wp-block-ub-divider ub_divider ub-divider-orientation-horizontal\" id=\"ub_divider_0bae8550-d3db-49de-913c-b69962c3f90b\"><div class=\"ub_divider_wrapper\" style=\"position: relative; margin-bottom: 2px; width: 100%; height: 2px; \" data-divider-alignment=\"center\"><div class=\"ub_divider_line\" style=\"border-top: 2px solid #ccc; margin-top: 2px; \"><\/div><\/div><\/div>\n\n\n<figure class=\"wp-block-image size-large\"><img data-opt-id=2041836354  fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"449\" src=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:1024\/h:449\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-7.png\" alt=\"\" class=\"wp-image-14025\" srcset=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:1024\/h:449\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-7.png 1024w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:300\/h:131\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-7.png 300w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:768\/h:337\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-7.png 768w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:360\/h:158\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-7.png 360w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:1344\/h:589\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-7.png 1344w\" sizes=\"(max-width: 847px) 100vw, 847px\" \/><\/figure>\n\n\n\n<p><\/p>\n\n\n<div class=\"wp-block-ub-divider ub_divider ub-divider-orientation-horizontal\" id=\"ub_divider_5983ff48-1750-42e3-9fc3-85eb0f30ba67\"><div class=\"ub_divider_wrapper\" style=\"position: relative; margin-bottom: 2px; width: 100%; height: 2px; \" data-divider-alignment=\"center\"><div class=\"ub_divider_line\" style=\"border-top: 2px solid #ccc; margin-top: 2px; \"><\/div><\/div><\/div>\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img data-opt-id=1803551029  fetchpriority=\"high\" decoding=\"async\" width=\"431\" height=\"675\" src=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:auto\/h:auto\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/PRA.png\" alt=\"\" class=\"wp-image-14027\" srcset=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:431\/h:675\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/PRA.png 431w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:192\/h:300\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/PRA.png 192w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:172\/h:270\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/PRA.png 172w\" sizes=\"(max-width: 431px) 100vw, 431px\" \/><figcaption class=\"wp-element-caption\"><a href=\"https:\/\/www.cii.co.uk\/media\/4372607\/regulatory_landscape_update_april_2013_vfonline.pdf\" data-type=\"URL\" data-id=\"https:\/\/www.cii.co.uk\/media\/4372607\/regulatory_landscape_update_april_2013_vfonline.pdf\">Figure 1: The New Regulatory Structure<\/a><\/figcaption><\/figure>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-3 kt-inner-tab14017_003dc1-b2\"><div class=\"kt-tab-inner-content-inner\">\n<div class=\"wp-block-esab-accordion esab-uvkl45ay\" data-mode=\"global\"><div class=\"esab__container\">\n<div class=\"wp-block-esab-accordion-child\"><div class=\"esab__head\" role=\"button\" aria-expanded=\"false\"><div class=\"esab__heading_txt\"><p class=\"esab__heading_tag\"><strong>Five \u2018categories\u2019 <\/strong><\/p><\/div><div class=\"esab__icon\"><div class=\"esab__collapse\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m3.5 20.5c-4.7-4.7-4.7-12.3 0-17 4.7-4.7 12.3-4.7 17 0 4.6 4.7 4.6 12.3 0 17-4.7 4.6-12.3 4.6-17 0zm0.9-0.9c4.2 4.2 11 4.2 15.2 0 4.2-4.2 4.2-11 0-15.2-4.2-4.3-11-4.3-15.2 0-4.3 4.2-4.3 11 0 15.2z\"><\/path><path d=\"m11.4 15.9v-3.3h-3.3c-0.3 0-0.6-0.3-0.6-0.6 0-0.4 0.3-0.6 0.6-0.6h3.3v-3.3c0-0.3 0.3-0.6 0.6-0.6 0.3 0 0.6 0.3 0.6 0.6v3.3h3.3c0.3 0 0.6 0.2 0.6 0.6q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2h-3.3v3.3q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2c-0.4 0-0.6-0.3-0.6-0.6z\"><\/path><\/svg> <\/div><div class=\"esab__expand\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m12 24c-6.6 0-12-5.4-12-12 0-6.6 5.4-12 12-12 6.6 0 12 5.4 12 12 0 6.6-5.4 12-12 12zm10.6-12c0-5.9-4.7-10.6-10.6-10.6-5.9 0-10.6 4.7-10.6 10.6 0 5.9 4.7 10.6 10.6 10.6 5.9 0 10.6-4.7 10.6-10.6z\"><\/path><path d=\"m5.6 11.3h12.8v1.4h-12.8z\"><\/path><\/svg> <\/div><\/div><\/div><div class=\"esab__body\">\n<ul class=\"wp-block-list\">\n<li>A core part of the risk assessment is the potential impact assessment.<\/li>\n\n\n\n<li>The PRA assess the significance of a firm to the stability of the UK financial system.<\/li>\n\n\n\n<li>This \u2018potential impact\u2019 reflects a firm\u2019s potential to affect adversely the stability of the system by failing, coming under operational or financial stress, or because of the way in which it carries out its business.<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img data-opt-id=1902631271  data-opt-src=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:1024\/h:550\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-8.png\"  loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"550\" src=\"data:image/svg+xml,%3Csvg%20viewBox%3D%220%200%201024%20550%22%20width%3D%221024%22%20height%3D%22550%22%20xmlns%3D%22http%3A%2F%2Fwww.w3.org%2F2000%2Fsvg%22%3E%3Crect%20width%3D%221024%22%20height%3D%22550%22%20fill%3D%22transparent%22%2F%3E%3C%2Fsvg%3E\" alt=\"\" class=\"wp-image-14031\" old-srcset=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:1024\/h:550\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-8.png 1024w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:300\/h:161\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-8.png 300w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:768\/h:413\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-8.png 768w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:360\/h:193\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-8.png 360w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:1387\/h:745\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-8.png 1387w\" \/><\/figure>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-esab-accordion-child\"><div class=\"esab__head\" role=\"button\" aria-expanded=\"false\"><div class=\"esab__heading_txt\"><p class=\"esab__heading_tag\"><strong>Five \u2018categories\u2019 &#8211; Explanation <\/strong><\/p><\/div><div class=\"esab__icon\"><div class=\"esab__collapse\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m3.5 20.5c-4.7-4.7-4.7-12.3 0-17 4.7-4.7 12.3-4.7 17 0 4.6 4.7 4.6 12.3 0 17-4.7 4.6-12.3 4.6-17 0zm0.9-0.9c4.2 4.2 11 4.2 15.2 0 4.2-4.2 4.2-11 0-15.2-4.2-4.3-11-4.3-15.2 0-4.3 4.2-4.3 11 0 15.2z\"><\/path><path d=\"m11.4 15.9v-3.3h-3.3c-0.3 0-0.6-0.3-0.6-0.6 0-0.4 0.3-0.6 0.6-0.6h3.3v-3.3c0-0.3 0.3-0.6 0.6-0.6 0.3 0 0.6 0.3 0.6 0.6v3.3h3.3c0.3 0 0.6 0.2 0.6 0.6q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2h-3.3v3.3q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2c-0.4 0-0.6-0.3-0.6-0.6z\"><\/path><\/svg> <\/div><div class=\"esab__expand\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m12 24c-6.6 0-12-5.4-12-12 0-6.6 5.4-12 12-12 6.6 0 12 5.4 12 12 0 6.6-5.4 12-12 12zm10.6-12c0-5.9-4.7-10.6-10.6-10.6-5.9 0-10.6 4.7-10.6 10.6 0 5.9 4.7 10.6 10.6 10.6 5.9 0 10.6-4.7 10.6-10.6z\"><\/path><path d=\"m5.6 11.3h12.8v1.4h-12.8z\"><\/path><\/svg> <\/div><\/div><\/div><div class=\"esab__body\">\n<p><\/p>\n\n\n\n<p>Divide all deposit-takers and designated investment firms that PRA supervise into the five \u2018categories\u2019 of impact below:<\/p>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Category 1<\/strong><\/td><td>The most significant deposit-takers or designated investment firms whose size, interconnectedness, complexity, and business type give them <strong>the capacity to cause very significant disruption to the UK financial system<\/strong> (and through that to economic activity more widely) by failing, or by carrying on their business in an unsafe manner.<\/td><\/tr><tr><td><strong>Category 2<\/strong><\/td><td>Significant deposit-takers or designated investment firms whose size, interconnectedness, complexity, and business type give them the capacity to <strong>cause some disruption to the UK financial system<\/strong> (and through that to economic activity more widely) by failing, or by carrying on their business in an unsafe manner.<\/td><\/tr><tr><td><strong>Category 3<\/strong><\/td><td>Deposit-takers or designated investment firms whose size, interconnectedness, complexity, and business type give them <strong>the capacity to cause minor disruption to the UK financial system <\/strong>by failing, or by carrying on their business in an unsafe manner, but where difficulties across a whole sector or subsector have the potential to generate disruption.<\/td><\/tr><tr><td><strong>Category 4<\/strong><\/td><td>Deposit-takers or designated investment firms whose size, interconnectedness, complexity, and business type give them <strong>very little capacity individually to cause disruption to the UK financial system <\/strong>by failing, or by carrying on their business in an unsafe manner, but where difficulties across a whole sector or subsector have the potential to generate disruption.<\/td><\/tr><tr><td><strong>Category 5<\/strong><\/td><td>Deposit-takers or designated investment firms whose size, interconnectedness, complexity, and business type give them <strong>almost no capacity individually to cause disruption to the UK financial system <\/strong>by failing, or by carrying on their business in an unsafe manner, but where difficulties across a whole sector or subsector may have the potential to generate some disruption.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-esab-accordion-child\"><div class=\"esab__head\" role=\"button\" aria-expanded=\"false\"><div class=\"esab__heading_txt\"><p class=\"esab__heading_tag\"><strong>Significant firms<\/strong> &amp; <strong>Supervisory Models<\/strong> <\/p><\/div><div class=\"esab__icon\"><div class=\"esab__collapse\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m3.5 20.5c-4.7-4.7-4.7-12.3 0-17 4.7-4.7 12.3-4.7 17 0 4.6 4.7 4.6 12.3 0 17-4.7 4.6-12.3 4.6-17 0zm0.9-0.9c4.2 4.2 11 4.2 15.2 0 4.2-4.2 4.2-11 0-15.2-4.2-4.3-11-4.3-15.2 0-4.3 4.2-4.3 11 0 15.2z\"><\/path><path d=\"m11.4 15.9v-3.3h-3.3c-0.3 0-0.6-0.3-0.6-0.6 0-0.4 0.3-0.6 0.6-0.6h3.3v-3.3c0-0.3 0.3-0.6 0.6-0.6 0.3 0 0.6 0.3 0.6 0.6v3.3h3.3c0.3 0 0.6 0.2 0.6 0.6q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2h-3.3v3.3q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2c-0.4 0-0.6-0.3-0.6-0.6z\"><\/path><\/svg> <\/div><div class=\"esab__expand\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m12 24c-6.6 0-12-5.4-12-12 0-6.6 5.4-12 12-12 6.6 0 12 5.4 12 12 0 6.6-5.4 12-12 12zm10.6-12c0-5.9-4.7-10.6-10.6-10.6-5.9 0-10.6 4.7-10.6 10.6 0 5.9 4.7 10.6 10.6 10.6 5.9 0 10.6-4.7 10.6-10.6z\"><\/path><path d=\"m5.6 11.3h12.8v1.4h-12.8z\"><\/path><\/svg> <\/div><\/div><\/div><div class=\"esab__body\">\n<ol class=\"wp-block-list\">\n<li><strong>Significant firms: <\/strong>categories 1 &amp; 2<strong> <\/strong>and<strong> smaller firms<\/strong>: categories 3-5<\/li>\n\n\n\n<li><strong>Supervisory Models<\/strong>\n<ul class=\"wp-block-list\">\n<li><strong>Category 4 firms:<\/strong>\n<ul class=\"wp-block-list\">\n<li>The annual supervisory assessment visit<\/li>\n\n\n\n<li>Desk-based reviews of returns and management information<\/li>\n\n\n\n<li>Issue-driven meetings and <abbr class='c2c-text-hover' title='acting in response to a situation rather than creating or controlling it.'>reactive<\/abbr> work<\/li>\n\n\n\n<li>Peer group and trend analysis<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Category 5 firms:<\/strong>\n<ul class=\"wp-block-list\">\n<li>Firm enquiries function for routine queries<\/li>\n\n\n\n<li>Broadly <abbr class='c2c-text-hover' title='acting in response to a situation rather than creating or controlling it.'>reactive<\/abbr> supervision in response to <abbr class='c2c-text-hover' title='the selling of a security to trigger capital gains or losses\/Crystallising your pension is the process of freeing up your investments and obtaining access to your pension savings\/The process of a floating charge converting into a fixed charge when certain events occur.'>crystallised<\/abbr> risks<\/li>\n\n\n\n<li>Some proactive analysis and assessment at solo and peer-group level<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n<\/div><\/div>\n<\/div><\/div>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\"><\/ul>\n\n\n\n<p><\/p>\n\n\n<div class=\"wp-block-ub-divider ub_divider ub-divider-orientation-horizontal\" id=\"ub_divider_bd222495-9bc7-47b1-ab06-ac6ff1a832a3\"><div class=\"ub_divider_wrapper\" style=\"position: relative; margin-bottom: 2px; width: 100%; height: 2px; \" data-divider-alignment=\"center\"><div class=\"ub_divider_line\" style=\"border-top: 2px solid #ccc; margin-top: 2px; \"><\/div><\/div><\/div>\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe title=\"How AIG Crashed The World Economy\" width=\"847\" height=\"476\" src=\"https:\/\/www.youtube.com\/embed\/RB12vExkVtw?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-4-3 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe title=\"AIG: We Own It\" width=\"847\" height=\"635\" src=\"https:\/\/www.youtube.com\/embed\/1oLpepYSTLY?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<p>Read more:<\/p>\n\n\n\n<p><a href=\"https:\/\/www.bankofengland.co.uk\/-\/media\/boe\/files\/prudential-regulation\/approach\/banking-approach-2018.pdf\">https:\/\/www.bankofengland.co.uk\/-\/media\/boe\/files\/prudential-regulation\/approach\/banking-approach-2018.pdf<\/a><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><a href=\"https:\/\/www.bankofengland.co.uk\/-\/media\/boe\/files\/prudential-regulation\/approach\/insurance-approach-2018.pdf?la=en&amp;hash=4055BBB0B728E1F9E536AB09D69107D01236C658\">https:\/\/www.bankofengland.co.uk\/-\/media\/boe\/files\/prudential-regulation\/approach\/insurance-approach-2018.pdf?la=en&amp;hash=4055BBB0B728E1F9E536AB09D69107D01236C658<\/a><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><a href=\"https:\/\/www.fsb.org\/wp-content\/uploads\/P140421.pdf\">https:\/\/www.fsb.org\/<abbr class='c2c-text-hover' title='WordPress'>wp<\/abbr>-content\/uploads\/P140421.pdf<\/a><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><a href=\"https:\/\/www.fca.org.uk\/publication\/impact-assessments\/whistleblowing-in-deposit-takers-pra-designated-investment-firms-and-insurers.pdf\">https:\/\/www.fca.org.uk\/publication\/impact-assessments\/whistleblowing-in-deposit-takers-pra-designated-investment-firms-and-insurers.pdf<\/a><\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-4 kt-inner-tab14017_cdde6f-7f\"><div class=\"kt-tab-inner-content-inner\">\n<div class=\"wp-block-esab-accordion esab-9a39byj4\" data-mode=\"global\"><div class=\"esab__container\">\n<div class=\"wp-block-esab-accordion-child\"><div class=\"esab__head\" role=\"button\" aria-expanded=\"false\"><div class=\"esab__heading_txt\"><p class=\"esab__heading_tag\"><strong>Activity<\/strong><\/p><\/div><div class=\"esab__icon\"><div class=\"esab__collapse\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m3.5 20.5c-4.7-4.7-4.7-12.3 0-17 4.7-4.7 12.3-4.7 17 0 4.6 4.7 4.6 12.3 0 17-4.7 4.6-12.3 4.6-17 0zm0.9-0.9c4.2 4.2 11 4.2 15.2 0 4.2-4.2 4.2-11 0-15.2-4.2-4.3-11-4.3-15.2 0-4.3 4.2-4.3 11 0 15.2z\"><\/path><path d=\"m11.4 15.9v-3.3h-3.3c-0.3 0-0.6-0.3-0.6-0.6 0-0.4 0.3-0.6 0.6-0.6h3.3v-3.3c0-0.3 0.3-0.6 0.6-0.6 0.3 0 0.6 0.3 0.6 0.6v3.3h3.3c0.3 0 0.6 0.2 0.6 0.6q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2h-3.3v3.3q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2c-0.4 0-0.6-0.3-0.6-0.6z\"><\/path><\/svg> <\/div><div class=\"esab__expand\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m12 24c-6.6 0-12-5.4-12-12 0-6.6 5.4-12 12-12 6.6 0 12 5.4 12 12 0 6.6-5.4 12-12 12zm10.6-12c0-5.9-4.7-10.6-10.6-10.6-5.9 0-10.6 4.7-10.6 10.6 0 5.9 4.7 10.6 10.6 10.6 5.9 0 10.6-4.7 10.6-10.6z\"><\/path><path d=\"m5.6 11.3h12.8v1.4h-12.8z\"><\/path><\/svg> <\/div><\/div><\/div><div class=\"esab__body\">\n<p>What is The PRA Approach to Supervision? \u201cForward-looking and judgement-based supervision\u2026\u201d What does this mean in practice?<\/p>\n\n\n\n<p><\/p>\n\n\n<div class=\"padlet-embed\" style=\"border:1px solid rgba(0,0,0,0.1);border-radius:2px;box-sizing:border-box;overflow:hidden;position:relative;width:100%;background:#F4F4F4\">\n<p style=\"padding:0;margin:0\"><iframe src=\"https:\/\/coventryunionline.padlet.org\/embed\/vbwyk41bq13jwt7v\" frameborder=\"0\" allow=\"camera;microphone;geolocation\" style=\"width:100%;height:608px;display:block;padding:0;margin:0\"><\/iframe><\/p>\n<div style=\"display:flex;align-items:center;justify-content:end;margin:0;height:28px\"><a href=\"https:\/\/padlet.com?ref=embed\" style=\"display:block;flex-grow:0;margin:0;border:none;padding:0;text-decoration:none\" target=\"_blank\" rel=\"noopener\"><\/p>\n<div style=\"display:flex;align-items:center;\"><img data-opt-id=1441106896  fetchpriority=\"high\" decoding=\"async\" src=\"https:\/\/padlet.net\/embeds\/made_with_padlet_2022.png\" width=\"114\" height=\"28\" style=\"padding:0;margin:0;background:0 0;border:none;box-shadow:none\" alt=\"Made with Padlet\"><\/div>\n<p><\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-esab-accordion-child\"><div class=\"esab__head\" role=\"button\" aria-expanded=\"false\"><div class=\"esab__heading_txt\"><p class=\"esab__heading_tag\"><strong>Three key principles<\/strong><\/p><\/div><div class=\"esab__icon\"><div class=\"esab__collapse\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m3.5 20.5c-4.7-4.7-4.7-12.3 0-17 4.7-4.7 12.3-4.7 17 0 4.6 4.7 4.6 12.3 0 17-4.7 4.6-12.3 4.6-17 0zm0.9-0.9c4.2 4.2 11 4.2 15.2 0 4.2-4.2 4.2-11 0-15.2-4.2-4.3-11-4.3-15.2 0-4.3 4.2-4.3 11 0 15.2z\"><\/path><path d=\"m11.4 15.9v-3.3h-3.3c-0.3 0-0.6-0.3-0.6-0.6 0-0.4 0.3-0.6 0.6-0.6h3.3v-3.3c0-0.3 0.3-0.6 0.6-0.6 0.3 0 0.6 0.3 0.6 0.6v3.3h3.3c0.3 0 0.6 0.2 0.6 0.6q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2h-3.3v3.3q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2c-0.4 0-0.6-0.3-0.6-0.6z\"><\/path><\/svg> <\/div><div class=\"esab__expand\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m12 24c-6.6 0-12-5.4-12-12 0-6.6 5.4-12 12-12 6.6 0 12 5.4 12 12 0 6.6-5.4 12-12 12zm10.6-12c0-5.9-4.7-10.6-10.6-10.6-5.9 0-10.6 4.7-10.6 10.6 0 5.9 4.7 10.6 10.6 10.6 5.9 0 10.6-4.7 10.6-10.6z\"><\/path><path d=\"m5.6 11.3h12.8v1.4h-12.8z\"><\/path><\/svg> <\/div><\/div><\/div><div class=\"esab__body\">\n<p><\/p>\n\n\n\n<p><br><a href=\"https:\/\/www.bankofengland.co.uk\/-\/media\/boe\/files\/prudential-regulation\/approach\/insurance-approach-2018.pd#:~:text=The%20three%20principles%20underpinning%20our,and%20firms%20that%20are%20likely\">The PRA&#8217;s supervisory approach<\/a> follows three key principles:<\/p>\n\n\n\n<p><\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>judgement-based<\/strong> \n<ul class=\"wp-block-list\">\n<li>Judgement-based supervision is presented as a new approach to the way financial <abbr class='c2c-text-hover' title='an organization that exists to serve a public purpose such as education or support for people who need help'>institutions<\/abbr> are supervised. As such it addresses the how-to supervise, rather than the what or the who<\/li>\n\n\n\n<li>The essence of a judgement-based approach is <strong>a willingness to intervene when the regulator judges that the outcomes will, in future, be at variance to its <abbr class='c2c-text-hover' title='official permission or the right to do something, usually given as the result of a vote. the authority given to an elected group of people, such as a government, to perform an action or govern a country.'>mandate<\/abbr>, even if the firm does not agree<\/strong>.<\/li>\n\n\n\n<li>Such proactive intervention needs to be proportionate and justified, but if we are to improve outcomes and meet the expectations of Parliament and society, such judgements will have to be made.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>forward-looking<\/strong> \n<ul class=\"wp-block-list\">\n<li>Assess insurers not just against <strong>current risks<\/strong>, but also against those that could plausibly arise in <strong>the future.<\/strong><\/li>\n\n\n\n<li>Where the PRA judge it necessary to intervene, they generally aim to do so at an early stage.\n<ul class=\"wp-block-list\">\n<li>Insurers should be open and straightforward in their dealings with PRA, taking the initiative to raise issues of possible prudential concern at an early stage.<\/li>\n\n\n\n<li>PRA will respond proportionately.<\/li>\n\n\n\n<li>In this way, trust can be fostered on both sides.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Risk monitoring and risk control entail a great deal of judgment. Various supervisory tools (reports and statistical requirements),\n<ul class=\"wp-block-list\">\n<li>internal ratings (CAMELS &#8211; <strong><abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>Capital<\/abbr> adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to Market Risk<\/strong> and others),<\/li>\n\n\n\n<li>on-site examinations,<\/li>\n\n\n\n<li>internal audits,<\/li>\n\n\n\n<li>off-site examinations,<\/li>\n\n\n\n<li>consultations with senior management and others (disclosure, <abbr class='c2c-text-hover' title='The duties, pre-eminently a duty of loyalty, owed by a fiduciary to the other person in the fiduciary relationship, for example, by a trustee to the beneficiaries of a trust; by an agent to the agent&#039;s principal; by a company director to the company.'>fiduciary duties<\/abbr>) require that supervisors exercise forward-looking judgement.<\/li>\n\n\n\n<li>It is as much an art as science.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>focused on key risks.<\/strong> \n<ul class=\"wp-block-list\">\n<li>focus the supervision on those issues and those firms that, in their judgement, pose the greatest risk to the stability of the UK financial system and, in the case of insurers, to policyholder protection.<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-esab-accordion-child\"><div class=\"esab__head\" role=\"button\" aria-expanded=\"false\"><div class=\"esab__heading_txt\"><p class=\"esab__heading_tag\"><strong>Read more<\/strong><\/p><\/div><div class=\"esab__icon\"><div class=\"esab__collapse\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m3.5 20.5c-4.7-4.7-4.7-12.3 0-17 4.7-4.7 12.3-4.7 17 0 4.6 4.7 4.6 12.3 0 17-4.7 4.6-12.3 4.6-17 0zm0.9-0.9c4.2 4.2 11 4.2 15.2 0 4.2-4.2 4.2-11 0-15.2-4.2-4.3-11-4.3-15.2 0-4.3 4.2-4.3 11 0 15.2z\"><\/path><path d=\"m11.4 15.9v-3.3h-3.3c-0.3 0-0.6-0.3-0.6-0.6 0-0.4 0.3-0.6 0.6-0.6h3.3v-3.3c0-0.3 0.3-0.6 0.6-0.6 0.3 0 0.6 0.3 0.6 0.6v3.3h3.3c0.3 0 0.6 0.2 0.6 0.6q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2h-3.3v3.3q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2c-0.4 0-0.6-0.3-0.6-0.6z\"><\/path><\/svg> <\/div><div class=\"esab__expand\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m12 24c-6.6 0-12-5.4-12-12 0-6.6 5.4-12 12-12 6.6 0 12 5.4 12 12 0 6.6-5.4 12-12 12zm10.6-12c0-5.9-4.7-10.6-10.6-10.6-5.9 0-10.6 4.7-10.6 10.6 0 5.9 4.7 10.6 10.6 10.6 5.9 0 10.6-4.7 10.6-10.6z\"><\/path><path d=\"m5.6 11.3h12.8v1.4h-12.8z\"><\/path><\/svg> <\/div><\/div><\/div><div class=\"esab__body\">\n<p><\/p>\n\n\n\n<div data-wp-interactive=\"core\/file\" class=\"wp-block-file\"><object data-wp-bind--hidden=\"!state.hasPdfPreview\" hidden class=\"wp-block-file__embed\" data=\"https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/Defining-forward-looking-judgement-based-supervision.pdf\" type=\"application\/pdf\" style=\"width:100%;height:600px\" aria-label=\"Embed of Defining-forward-looking-judgement-based-supervision.\"><\/object><a id=\"wp-block-file--media-e471b0fa-509f-4df5-99ca-206e756294b5\" href=\"https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/Defining-forward-looking-judgement-based-supervision.pdf\">Defining-forward-looking-judgement-based-supervision<\/a><a href=\"https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/Defining-forward-looking-judgement-based-supervision.pdf\" class=\"wp-block-file__button wp-element-button\" download aria-describedby=\"wp-block-file--media-e471b0fa-509f-4df5-99ca-206e756294b5\">Download<\/a><\/div>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-esab-accordion-child\"><div class=\"esab__head\" role=\"button\" aria-expanded=\"false\"><div class=\"esab__heading_txt\"><p class=\"esab__heading_tag\"><strong>Firm Enquiries &amp; Supervision Team<\/strong><\/p><\/div><div class=\"esab__icon\"><div class=\"esab__collapse\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m3.5 20.5c-4.7-4.7-4.7-12.3 0-17 4.7-4.7 12.3-4.7 17 0 4.6 4.7 4.6 12.3 0 17-4.7 4.6-12.3 4.6-17 0zm0.9-0.9c4.2 4.2 11 4.2 15.2 0 4.2-4.2 4.2-11 0-15.2-4.2-4.3-11-4.3-15.2 0-4.3 4.2-4.3 11 0 15.2z\"><\/path><path d=\"m11.4 15.9v-3.3h-3.3c-0.3 0-0.6-0.3-0.6-0.6 0-0.4 0.3-0.6 0.6-0.6h3.3v-3.3c0-0.3 0.3-0.6 0.6-0.6 0.3 0 0.6 0.3 0.6 0.6v3.3h3.3c0.3 0 0.6 0.2 0.6 0.6q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2h-3.3v3.3q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2c-0.4 0-0.6-0.3-0.6-0.6z\"><\/path><\/svg> <\/div><div class=\"esab__expand\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m12 24c-6.6 0-12-5.4-12-12 0-6.6 5.4-12 12-12 6.6 0 12 5.4 12 12 0 6.6-5.4 12-12 12zm10.6-12c0-5.9-4.7-10.6-10.6-10.6-5.9 0-10.6 4.7-10.6 10.6 0 5.9 4.7 10.6 10.6 10.6 5.9 0 10.6-4.7 10.6-10.6z\"><\/path><path d=\"m5.6 11.3h12.8v1.4h-12.8z\"><\/path><\/svg> <\/div><\/div><\/div><div class=\"esab__body\">\n<p><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img data-opt-id=1129749127  data-opt-src=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:1024\/h:524\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-9.png\"  loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"524\" src=\"data:image/svg+xml,%3Csvg%20viewBox%3D%220%200%201024%20524%22%20width%3D%221024%22%20height%3D%22524%22%20xmlns%3D%22http%3A%2F%2Fwww.w3.org%2F2000%2Fsvg%22%3E%3Crect%20width%3D%221024%22%20height%3D%22524%22%20fill%3D%22transparent%22%2F%3E%3C%2Fsvg%3E\" alt=\"\" class=\"wp-image-14038\" old-srcset=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:1024\/h:524\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-9.png 1024w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:300\/h:154\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-9.png 300w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:768\/h:393\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-9.png 768w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:360\/h:184\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-9.png 360w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:1369\/h:701\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-9.png 1369w\" \/><\/figure>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-esab-accordion-child\"><div class=\"esab__head\" role=\"button\" aria-expanded=\"false\"><div class=\"esab__heading_txt\"><p class=\"esab__heading_tag\"><strong>Transfers of insurance business<\/strong><\/p><\/div><div class=\"esab__icon\"><div class=\"esab__collapse\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m3.5 20.5c-4.7-4.7-4.7-12.3 0-17 4.7-4.7 12.3-4.7 17 0 4.6 4.7 4.6 12.3 0 17-4.7 4.6-12.3 4.6-17 0zm0.9-0.9c4.2 4.2 11 4.2 15.2 0 4.2-4.2 4.2-11 0-15.2-4.2-4.3-11-4.3-15.2 0-4.3 4.2-4.3 11 0 15.2z\"><\/path><path d=\"m11.4 15.9v-3.3h-3.3c-0.3 0-0.6-0.3-0.6-0.6 0-0.4 0.3-0.6 0.6-0.6h3.3v-3.3c0-0.3 0.3-0.6 0.6-0.6 0.3 0 0.6 0.3 0.6 0.6v3.3h3.3c0.3 0 0.6 0.2 0.6 0.6q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2h-3.3v3.3q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2c-0.4 0-0.6-0.3-0.6-0.6z\"><\/path><\/svg> <\/div><div class=\"esab__expand\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m12 24c-6.6 0-12-5.4-12-12 0-6.6 5.4-12 12-12 6.6 0 12 5.4 12 12 0 6.6-5.4 12-12 12zm10.6-12c0-5.9-4.7-10.6-10.6-10.6-5.9 0-10.6 4.7-10.6 10.6 0 5.9 4.7 10.6 10.6 10.6 5.9 0 10.6-4.7 10.6-10.6z\"><\/path><path d=\"m5.6 11.3h12.8v1.4h-12.8z\"><\/path><\/svg> <\/div><\/div><\/div><div class=\"esab__body\">\n<p><\/p>\n\n\n\n<p><strong><a href=\"https:\/\/www.bankofengland.co.uk\/-\/media\/boe\/files\/prudential-regulation\/policy-statement\/2015\/ps715\" data-type=\"URL\" data-id=\"https:\/\/www.bankofengland.co.uk\/-\/media\/boe\/files\/prudential-regulation\/policy-statement\/2015\/ps715\">Transfers of insurance business<\/a> under <a href=\"https:\/\/www.legislation.gov.uk\/ukpga\/2000\/8\/part\/VII\" data-type=\"URL\" data-id=\"https:\/\/www.legislation.gov.uk\/ukpga\/2000\/8\/part\/VII\">Part VII <\/a>of the Financial Services and Markets Act 2000<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>An insurance business transfer scheme is defined in section 105 of FSMA and the definition has been extended to transfers from <abbr class='c2c-text-hover' title='sign and accept liability under (an insurance policy), thus guaranteeing payment in case loss or damage occurs \/ (of a bank or other financial institution) pledge to buy all the unsold shares in (an issue of new shares).'>underwriting<\/abbr> members and former members of Lloyd\u2019s. <\/li>\n\n\n\n<li>The business transferred may include <abbr class='c2c-text-hover' title='the amount of money that a person or organisation owes. legal responsibility for something'>liabilities<\/abbr> and potential <abbr class='c2c-text-hover' title='the amount of money that a person or organisation owes. legal responsibility for something'>liabilities<\/abbr> on expired policies, <abbr class='c2c-text-hover' title='the amount of money that a person or organisation owes. legal responsibility for something'>liabilities<\/abbr> on current policies and <abbr class='c2c-text-hover' title='the amount of money that a person or organisation owes. legal responsibility for something'>liabilities<\/abbr> on contracts to be written in the period until the transfer takes effect. <\/li>\n\n\n\n<li>The parties to schemes approved under foreign legislation or involving <abbr class='c2c-text-hover' title='refers to the process of substituting the original contract with a replacement contract, where the original party agrees to forgo any rights afforded to them by the original contract. In most novation agreements, the parties agree to extinguish the original contract and replace it with an entirely new contract.'>novations<\/abbr> of reinsurance or a <abbr class='c2c-text-hover' title='is an insurance company created by a group or corporation to insure its own risks (e.g., a parent company\u2019s subsidiaries).'>captive insurer<\/abbr> can apply to the court for an order sanctioning the scheme.\n<ul class=\"wp-block-list\">\n<li>The parties (usually insurers and transferees) may apply to the <strong>High Court<\/strong>.The court reviews:\n<ul class=\"wp-block-list\">\n<li>fairness<\/li>\n\n\n\n<li>impact on policyholders<\/li>\n\n\n\n<li>regulatory compliance<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>If satisfied, the court <strong>sanctions<\/strong> (approves) the scheme.<\/li>\n\n\n\n<li>This gives the transfer full legal effect.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>The PRA is likely to consider a <abbr class='c2c-text-hover' title='refers to the process of substituting the original contract with a replacement contract, where the original party agrees to forgo any rights afforded to them by the original contract. In most novation agreements, the parties agree to extinguish the original contract and replace it with an entirely new contract.'>novation<\/abbr> or a number of <abbr class='c2c-text-hover' title='refers to the process of substituting the original contract with a replacement contract, where the original party agrees to forgo any rights afforded to them by the original contract. In most novation agreements, the parties agree to extinguish the original contract and replace it with an entirely new contract.'>novations<\/abbr> as amounting to an insurance business transfer only if their number or value were such that the <abbr class='c2c-text-hover' title='refers to the process of substituting the original contract with a replacement contract, where the original party agrees to forgo any rights afforded to them by the original contract. In most novation agreements, the parties agree to extinguish the original contract and replace it with an entirely new contract.'>novation<\/abbr> was to be regarded as a transfer of part of the business. <\/li>\n\n\n\n<li>A <abbr class='c2c-text-hover' title='refers to the process of substituting the original contract with a replacement contract, where the original party agrees to forgo any rights afforded to them by the original contract. In most novation agreements, the parties agree to extinguish the original contract and replace it with an entirely new contract.'>novation<\/abbr> is an <abbr class='c2c-text-hover' title='= an offer + an acceptance.'>agreement<\/abbr> between the policyholder and two insurers whereby a contract with one insurer is replaced by a contract with the other<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-esab-accordion-child\"><div class=\"esab__head\" role=\"button\" aria-expanded=\"false\"><div class=\"esab__heading_txt\"><p class=\"esab__heading_tag\"><strong>Periodic Summary<\/strong><\/p><\/div><div class=\"esab__icon\"><div class=\"esab__collapse\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m3.5 20.5c-4.7-4.7-4.7-12.3 0-17 4.7-4.7 12.3-4.7 17 0 4.6 4.7 4.6 12.3 0 17-4.7 4.6-12.3 4.6-17 0zm0.9-0.9c4.2 4.2 11 4.2 15.2 0 4.2-4.2 4.2-11 0-15.2-4.2-4.3-11-4.3-15.2 0-4.3 4.2-4.3 11 0 15.2z\"><\/path><path d=\"m11.4 15.9v-3.3h-3.3c-0.3 0-0.6-0.3-0.6-0.6 0-0.4 0.3-0.6 0.6-0.6h3.3v-3.3c0-0.3 0.3-0.6 0.6-0.6 0.3 0 0.6 0.3 0.6 0.6v3.3h3.3c0.3 0 0.6 0.2 0.6 0.6q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2h-3.3v3.3q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2c-0.4 0-0.6-0.3-0.6-0.6z\"><\/path><\/svg> <\/div><div class=\"esab__expand\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m12 24c-6.6 0-12-5.4-12-12 0-6.6 5.4-12 12-12 6.6 0 12 5.4 12 12 0 6.6-5.4 12-12 12zm10.6-12c0-5.9-4.7-10.6-10.6-10.6-5.9 0-10.6 4.7-10.6 10.6 0 5.9 4.7 10.6 10.6 10.6 5.9 0 10.6-4.7 10.6-10.6z\"><\/path><path d=\"m5.6 11.3h12.8v1.4h-12.8z\"><\/path><\/svg> <\/div><\/div><\/div><div class=\"esab__body\">\n<p><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img data-opt-id=2121442603  data-opt-src=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:1024\/h:516\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-10.png\"  loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"516\" src=\"data:image/svg+xml,%3Csvg%20viewBox%3D%220%200%201024%20516%22%20width%3D%221024%22%20height%3D%22516%22%20xmlns%3D%22http%3A%2F%2Fwww.w3.org%2F2000%2Fsvg%22%3E%3Crect%20width%3D%221024%22%20height%3D%22516%22%20fill%3D%22transparent%22%2F%3E%3C%2Fsvg%3E\" alt=\"\" class=\"wp-image-14041\" old-srcset=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:1024\/h:516\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-10.png 1024w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:300\/h:151\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-10.png 300w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:768\/h:387\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-10.png 768w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:360\/h:181\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-10.png 360w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:1394\/h:702\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-10.png 1394w\" \/><\/figure>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-esab-accordion-child\"><div class=\"esab__head\" role=\"button\" aria-expanded=\"false\"><div class=\"esab__heading_txt\"><p class=\"esab__heading_tag\"><strong>Threshold Conditions<\/strong><\/p><\/div><div class=\"esab__icon\"><div class=\"esab__collapse\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m3.5 20.5c-4.7-4.7-4.7-12.3 0-17 4.7-4.7 12.3-4.7 17 0 4.6 4.7 4.6 12.3 0 17-4.7 4.6-12.3 4.6-17 0zm0.9-0.9c4.2 4.2 11 4.2 15.2 0 4.2-4.2 4.2-11 0-15.2-4.2-4.3-11-4.3-15.2 0-4.3 4.2-4.3 11 0 15.2z\"><\/path><path d=\"m11.4 15.9v-3.3h-3.3c-0.3 0-0.6-0.3-0.6-0.6 0-0.4 0.3-0.6 0.6-0.6h3.3v-3.3c0-0.3 0.3-0.6 0.6-0.6 0.3 0 0.6 0.3 0.6 0.6v3.3h3.3c0.3 0 0.6 0.2 0.6 0.6q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2h-3.3v3.3q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2c-0.4 0-0.6-0.3-0.6-0.6z\"><\/path><\/svg> <\/div><div class=\"esab__expand\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m12 24c-6.6 0-12-5.4-12-12 0-6.6 5.4-12 12-12 6.6 0 12 5.4 12 12 0 6.6-5.4 12-12 12zm10.6-12c0-5.9-4.7-10.6-10.6-10.6-5.9 0-10.6 4.7-10.6 10.6 0 5.9 4.7 10.6 10.6 10.6 5.9 0 10.6-4.7 10.6-10.6z\"><\/path><path d=\"m5.6 11.3h12.8v1.4h-12.8z\"><\/path><\/svg> <\/div><\/div><\/div><div class=\"esab__body\">\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Threshold Conditions<\/strong>\n<ul class=\"wp-block-list\">\n<li>Minimum requirements that firms must meet at all times in order to be permitted to carry out regulated activities<\/li>\n\n\n\n<li>Firms will need to meet both PRA-specific and FCA-specific threshold conditions<\/li>\n\n\n\n<li>PRA-specific threshold conditions: \n<ul class=\"wp-block-list\">\n<li>Legal status<\/li>\n\n\n\n<li>Location of offices<\/li>\n\n\n\n<li>Prudent <abbr class='c2c-text-hover' title='to organise and perform a particular activity.'>conduct<\/abbr>\n<ul class=\"wp-block-list\">\n<li>financially sound<\/li>\n\n\n\n<li>managed safely and responsibly<\/li>\n\n\n\n<li>able to meet <abbr class='c2c-text-hover' title='the amount of money that a person or organisation owes. legal responsibility for something'>liabilities<\/abbr> as they fall due<\/li>\n\n\n\n<li>compliant with prudential standards (e.g., solvency requirements)<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Suitability\n<ul class=\"wp-block-list\">\n<li>This focuses on the <strong>people<\/strong> who run the firm. The FCA\/PRA expect:\n<ul class=\"wp-block-list\">\n<li>directors and senior managers to be <strong>fit and proper<\/strong>,<\/li>\n\n\n\n<li>honest, competent, and financially sound,<\/li>\n\n\n\n<li>governance arrangements to be appropriate,<\/li>\n\n\n\n<li>the firm to treat customers fairly.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Effective supervision<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>The PRA will assess firms against the threshold conditions on a continuous basis<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/div><\/div>\n<\/div><\/div>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\"><\/ul>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe title=\"New approach to financial supervision: Prudential Regulation Authority\" width=\"847\" height=\"476\" src=\"https:\/\/www.youtube.com\/embed\/yJDp1XY3DJM?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-5 kt-inner-tab14017_f0361c-98\"><div class=\"kt-tab-inner-content-inner\">\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Effective delivery of PRA&#8217;s approach requires coordination with the FCA\n<ul class=\"wp-block-list\">\n<li>Focussed at the firm level<\/li>\n\n\n\n<li>MoU (Memorandum of Understanding) and colleges to ensure statutory duty to co-ordinate is effective<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Firm-specific supervision alone is not sufficient to deliver financial stability. <\/li>\n\n\n\n<li>Must be complemented by an effective macroprudential regime.<\/li>\n\n\n\n<li>The two-way flow of information and exchange of views between the PRA and the FPC (Financial Policy Committee)\n<ul class=\"wp-block-list\">\n<li>PRA is responsible for implementing relevant FPC recommendations on a \u2018comply or explain\u2019 basis<\/li>\n\n\n\n<li>FPC has powers to direct the PRA<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-6 kt-inner-tab14017_0eb1d7-bb\"><div class=\"kt-tab-inner-content-inner\">\n<ul class=\"wp-block-list\">\n<li>Their main objectives are to:\n<ul class=\"wp-block-list\">\n<li>Communicate the PRA objectives and expectations to the industry clearly.<\/li>\n\n\n\n<li>Understand market trends in order to inform their forward-looking approach and communicate supervisory priorities for the sector.<\/li>\n\n\n\n<li>Raise awareness of the information and support available to smaller insurers.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/div><\/div>\n<\/div><\/div><\/div>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-pane kt-accordion-pane kt-accordion-pane-5 kt-pane14017_bb54c7-27\"><div class=\"kt-accordion-header-wrap\"><button class=\"kt-blocks-accordion-header kt-acccordion-button-label-show\" type=\"button\"><span class=\"kt-blocks-accordion-title-wrap\"><span class=\"kt-blocks-accordion-title\"><strong>2. Emerging Risks for Insurers<\/strong><\/span><\/span><span class=\"kt-blocks-accordion-icon-trigger\"><\/span><\/button><\/div><div class=\"kt-accordion-panel kt-accordion-panel-hidden\"><div class=\"kt-accordion-panel-inner\">\n<p><strong>Activity: Identify the risks that insurers may face, the impact of these risks and suggest solutions<\/strong><\/p>\n\n\n<style>.kt-tabs-id14017_46453a-a1 > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;border-top-left-radius:0px;border-top-right-radius:0px;border-bottom-right-radius:0px;border-bottom-left-radius:0px;padding-top:var(--global-kb-spacing-sm, 1.5rem);padding-right:var(--global-kb-spacing-sm, 1.5rem);padding-bottom:var(--global-kb-spacing-sm, 1.5rem);padding-left:var(--global-kb-spacing-sm, 1.5rem);background:var(--global-palette9, #ffffff);}.wp-block-kadence-tabs .kt-tabs-id14017_46453a-a1 > .kt-tabs-title-list li{margin-top:0px;margin-right:8px;margin-bottom:0px;margin-left:0px;}.wp-block-kadence-tabs .kt-tabs-id14017_46453a-a1 > .kt-tabs-title-list li:last-child{margin-right:0px;}.wp-block-kadence-tabs .kt-tabs-id14017_46453a-a1 > .kt-tabs-title-list li .kt-tab-title, .wp-block-kadence-tabs .kt-tabs-id14017_46453a-a1 > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title{line-height:1.4em;font-weight:regular;font-style:normal;border-top-width:0px;border-right-width:0px;border-bottom-width:0px;border-left-width:0px;border-top-left-radius:4px;border-top-right-radius:4px;border-bottom-right-radius:0px;border-bottom-left-radius:0px;padding-top:8px;padding-right:20px;padding-bottom:8px;padding-left:20px;border-color:var(--global-palette7, #eeeeee);color:var(--global-palette4, #2D3748);background:var(--global-palette7, #eeeeee);}.wp-block-kadence-tabs .kt-tabs-id14017_46453a-a1 > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title{margin-top:0px;margin-right:8px;margin-bottom:0px;margin-left:0px;}.wp-block-kadence-tabs .kt-tabs-id14017_46453a-a1 > .kt-tabs-title-list li .kt-tab-title:hover, .wp-block-kadence-tabs .kt-tabs-id14017_46453a-a1 > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title:hover{border-color:var(--global-palette7, #eeeeee);color:var(--global-palette3, #1A202C);background:var(--global-palette8, #F7FAFC);}.wp-block-kadence-tabs .kt-tabs-id14017_46453a-a1 > .kt-tabs-title-list li.kt-tab-title-active .kt-tab-title, .wp-block-kadence-tabs .kt-tabs-id14017_46453a-a1 > .kt-tabs-content-wrap > .kt-tabs-accordion-title.kt-tab-title-active .kt-tab-title{border-color:var(--global-palette7, #eeeeee);color:#ffffff;background:#0a6689;}@media all and (max-width: 1024px){.kt-tabs-id14017_46453a-a1 > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;}}@media all and (max-width: 767px){.kt-tabs-id14017_46453a-a1 > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;}}<\/style>\n<div class=\"wp-block-kadence-tabs alignnone\"><div class=\"kt-tabs-wrap kt-tabs-id14017_46453a-a1 kt-tabs-has-12-tabs kt-active-tab-8 kt-tabs-layout-tabs kt-tabs-tablet-layout-inherit kt-tabs-mobile-layout-inherit kt-tab-alignment-left \"><ul class=\"kt-tabs-title-list\"><li id=\"tab-strongactivitystrong\" class=\"kt-title-item kt-title-item-1 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongactivitystrong\" data-tab=\"1\" class=\"kt-tab-title kt-tab-title-1 \"><span class=\"kt-title-text\"><strong>Activity<\/strong><\/span><\/a><\/li><li id=\"tab-strong1definitionofemergingrisksstrong\" class=\"kt-title-item kt-title-item-2 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strong1definitionofemergingrisksstrong\" data-tab=\"2\" class=\"kt-tab-title kt-tab-title-2 \"><span class=\"kt-title-text\"><strong>1. Definition of emerging risks<\/strong><\/span><\/a><\/li><li id=\"tab-strong2keydriversofriskstrong\" class=\"kt-title-item kt-title-item-3 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strong2keydriversofriskstrong\" data-tab=\"3\" class=\"kt-tab-title kt-tab-title-3 \"><span class=\"kt-title-text\"><strong>2. Key drivers of risk<\/strong><\/span><\/a><\/li><li id=\"tab-strong3insurance-specificrisksstrong\" class=\"kt-title-item kt-title-item-4 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strong3insurance-specificrisksstrong\" data-tab=\"4\" class=\"kt-tab-title kt-tab-title-4 \"><span class=\"kt-title-text\"><strong>3. Insurance-specific risks<\/strong><\/span><\/a><\/li><li id=\"tab-strongem31lifeemergingrisksemstrong\" class=\"kt-title-item kt-title-item-5 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongem31lifeemergingrisksemstrong\" data-tab=\"5\" class=\"kt-tab-title kt-tab-title-5 \"><span class=\"kt-title-text\"><strong><em>3.1. Life Emerging Risks<\/em><\/strong><\/span><\/a><\/li><li id=\"tab-strongem32thelow-interestrateampimplicationsforinsurersemstrong\" class=\"kt-title-item kt-title-item-6 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongem32thelow-interestrateampimplicationsforinsurersemstrong\" data-tab=\"6\" class=\"kt-tab-title kt-tab-title-6 \"><span class=\"kt-title-text\"><strong><em>3.2. The low-interest rate &amp; Implications for insurers<\/em><\/strong><\/span><\/a><\/li><li id=\"tab-strongem33financialrisksemstrong\" class=\"kt-title-item kt-title-item-7 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongem33financialrisksemstrong\" data-tab=\"7\" class=\"kt-tab-title kt-tab-title-7 \"><span class=\"kt-title-text\"><strong><em>3.3. Financial risks<\/em><\/strong><\/span><\/a><\/li><li id=\"tab-strongem34productrisksemstrong\" class=\"kt-title-item kt-title-item-8 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-active\"><a href=\"#tab-strongem34productrisksemstrong\" data-tab=\"8\" class=\"kt-tab-title kt-tab-title-8 \"><span class=\"kt-title-text\"><strong><em>3.4. Product Risks <\/em><\/strong><\/span><\/a><\/li><li id=\"tab-strongem35generalinsuranceemergingrisksemstrong\" class=\"kt-title-item kt-title-item-9 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongem35generalinsuranceemergingrisksemstrong\" data-tab=\"9\" class=\"kt-tab-title kt-tab-title-9 \"><span class=\"kt-title-text\"><strong><em>3.5. General Insurance Emerging Risks<\/em><\/strong><\/span><\/a><\/li><li id=\"tab-strongem36technologyrisk-cyberattacksemstrong\" class=\"kt-title-item kt-title-item-10 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongem36technologyrisk-cyberattacksemstrong\" data-tab=\"10\" class=\"kt-tab-title kt-tab-title-10 \"><span class=\"kt-title-text\"><strong><em>3.6. Technology risk &#8211; Cyberattacks<\/em><\/strong><\/span><\/a><\/li><li id=\"tab-strongem37stakeholderrisk-shadowbankingactivitiesemstrong\" class=\"kt-title-item kt-title-item-11 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongem37stakeholderrisk-shadowbankingactivitiesemstrong\" data-tab=\"11\" class=\"kt-tab-title kt-tab-title-11 \"><span class=\"kt-title-text\"><strong><em>3.7. Stakeholder risk &#8211; Shadow banking activities<\/em><\/strong><\/span><\/a><\/li><li id=\"tab-strongem38blackswan-combinedeffectofafinancialcatastropheamppandemiceventsemstrong\" class=\"kt-title-item kt-title-item-12 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongem38blackswan-combinedeffectofafinancialcatastropheamppandemiceventsemstrong\" data-tab=\"12\" class=\"kt-tab-title kt-tab-title-12 \"><span class=\"kt-title-text\"><strong><em>3.8. Black Swan &#8211; Combined effect of a financial, catastrophe &amp; pandemic events<\/em><\/strong><\/span><\/a><\/li><\/ul><div class=\"kt-tabs-content-wrap\">\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-1 kt-inner-tab14017_ad59e3-59\"><div class=\"kt-tab-inner-content-inner\"><\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-2 kt-inner-tab14017_97d698-d4\"><div class=\"kt-tab-inner-content-inner\">\n<p><\/p>\n\n\n\n<ul id=\"block-0e912f98-1ee3-4510-b5c8-bbcba43fe356\" class=\"wp-block-list\">\n<li>An emerging risk can be defined as:\n<ul class=\"wp-block-list\">\n<li>&#8220;an issue that is perceived to be potentially significant but which may not be fully understood or allowed for in insurance terms and conditions, pricing, reserving or <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>capital<\/abbr> setting&#8221;. (Source: Lloyd\u2019s of London)<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Examples:\n<ul class=\"wp-block-list\">\n<li>Artificial intelligence risks<\/li>\n\n\n\n<li>Climate change patterns<\/li>\n\n\n\n<li>New diseases (pandemics)<\/li>\n\n\n\n<li>Cyber threats<\/li>\n\n\n\n<li>Changes in social behaviour or legal trends<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>This means the risk is:\n<ul class=\"wp-block-list\">\n<li><strong>New, evolving or unfamiliar<\/strong><\/li>\n\n\n\n<li>Lacking in <strong>historical data<\/strong><\/li>\n\n\n\n<li>Difficult to model or predict<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>It means insurers may not yet have:\n<ul class=\"wp-block-list\">\n<li><strong>\u2714 Policy wording<\/strong><\/li>\n\n\n\n<li>The risk might not be clearly addressed or excluded in current insurance contracts.<\/li>\n\n\n\n<li><strong>\u2714 Pricing models<\/strong><\/li>\n\n\n\n<li>Premiums may not reflect the real <abbr class='c2c-text-hover' title='the purchase price, including the additional cost of bringing the product or service to its present location or condition, such as delivery charges. e.g.'>cost<\/abbr> of the risk because it is not well understood.<\/li>\n\n\n\n<li><strong>\u2714 Reserves<\/strong><\/li>\n\n\n\n<li>Insurers may not have set aside enough money to pay potential claims.<\/li>\n\n\n\n<li><strong>\u2714 <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>Capital<\/abbr> requirements<\/strong><\/li>\n\n\n\n<li>Regulatory <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>capital<\/abbr> may not fully <abbr class='c2c-text-hover' title='Part of double entry records, containing details of transactions for a specific item.'>account<\/abbr> for that new or emerging exposure.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-3 kt-inner-tab14017_31c77c-0a\"><div class=\"kt-tab-inner-content-inner\">\n<p><\/p>\n\n\n\n<ul id=\"block-a92c1958-bdac-4495-91c4-928c3eeae2d2\" class=\"wp-block-list\">\n<li>The key drivers of risk include:\n<ul class=\"wp-block-list\">\n<li>Economic, technological, environmental and socio-political developments as well as the interdependencies between them.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Other risk drivers can include:\n<ul class=\"wp-block-list\">\n<li>The changing business environment such as liability issues, evolving regulatory regimes, stakeholder expectations, and shifts in risk perception.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-4 kt-inner-tab14017_ec8583-e5\"><div class=\"kt-tab-inner-content-inner\">\n<ul class=\"wp-block-list\">\n<li>This session will concentrate on the insurable areas of risk for both life and general insurers. <\/li>\n\n\n\n<li>These risks include:\n<ul class=\"wp-block-list\">\n<li>Life Products Risk \n<ul class=\"wp-block-list\">\n<li><abbr class='c2c-text-hover' title='\u2018place on the right of the account called\u2019. It can mean either increasing or decreasing for different accounts'>credit<\/abbr> &amp; counterparties, impact of the low-interest rate environment, enhanced annuities and <abbr class='c2c-text-hover' title='(RDR) is a Financial Conduct Authority (FCA) initiative that aims to provide greater clarity about different types of financial services available.'>retail distribution review<\/abbr> &amp; platforms<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>General Insurance (GI) Risk\n<ul class=\"wp-block-list\">\n<li>impact of the low-interest rate environment, inadequate reserving, UK flooding and periodic payment orders<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Technology Risk \n<ul class=\"wp-block-list\">\n<li>cyber attacks<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Stakeholder Risk \n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.imf.org\/external\/pubs\/ft\/fandd\/basics\/52-shadow-banking.htm\" data-type=\"URL\" data-id=\"https:\/\/www.imf.org\/external\/pubs\/ft\/fandd\/basics\/52-shadow-banking.htm\">shadow banking activities<\/a><\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Black Swan Risks \n<ul class=\"wp-block-list\">\n<li>combined effect of financial, catastrophe &amp; pandemic<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-5 kt-inner-tab14017_91e78d-65\"><div class=\"kt-tab-inner-content-inner\">\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img data-opt-id=378693715  data-opt-src=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:auto\/h:auto\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-24.png\"  loading=\"lazy\" decoding=\"async\" width=\"746\" height=\"360\" src=\"data:image/svg+xml,%3Csvg%20viewBox%3D%220%200%20100%%20100%%22%20width%3D%22100%%22%20height%3D%22100%%22%20xmlns%3D%22http%3A%2F%2Fwww.w3.org%2F2000%2Fsvg%22%3E%3Crect%20width%3D%22100%%22%20height%3D%22100%%22%20fill%3D%22transparent%22%2F%3E%3C%2Fsvg%3E\" alt=\"\" class=\"wp-image-14294\" old-srcset=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:746\/h:360\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-24.png 746w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:300\/h:145\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-24.png 300w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:360\/h:174\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-24.png 360w\" \/><figcaption class=\"wp-element-caption\"><a href=\"https:\/\/www.axa.com\/en\/about-us\/emerging-risks-survey\" data-type=\"URL\" data-id=\"https:\/\/www.axa.com\/en\/about-us\/emerging-risks-survey\">A survey of emerging risks<\/a><\/figcaption><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe title=\"AXA Future Risks Report 2022 | English\" width=\"847\" height=\"476\" src=\"https:\/\/www.youtube.com\/embed\/o0dSgm5ZdLg?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n\n\n\n<p><a href=\"https:\/\/www.axa.com\/en\/news\/2022-future-risks-report\">https:\/\/www.axa.com\/en\/news\/2022-future-risks-report<\/a><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-6 kt-inner-tab14017_418e2a-79\"><div class=\"kt-tab-inner-content-inner\">\n<p><strong>Note: <\/strong>The low-interest rate environment&nbsp;is&nbsp;a key concern for life insurers&nbsp;because:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Their <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>assets<\/abbr> and <abbr class='c2c-text-hover' title='the amount of money that a person or organisation owes. legal responsibility for something'>liabilities<\/abbr> are heavily exposed to interest rate movements.&nbsp;<\/li>\n\n\n\n<li>In particular,&nbsp;their investments&nbsp;are concentrated&nbsp;in fixed-income securities&nbsp;that return interest, largely bonds.&nbsp;<\/li>\n\n\n\n<li>Moreover,&nbsp;their <abbr class='c2c-text-hover' title='the amount of money that a person or organisation owes. legal responsibility for something'>liabilities<\/abbr> also are sensitive to interest rates.&nbsp;<\/li>\n\n\n\n<li>Specifically,&nbsp;many of&nbsp;their products, such as annuities, have a guaranteed rate of return, usually in the form of interest that is credited.&nbsp;<\/li>\n\n\n\n<li>Life insurers&#8217; earnings are\u00a0mostly <abbr class='c2c-text-hover' title='base a concept on an extension or modification of (another concept). obtain something from (a specified source).'>derived<\/abbr> from the spread between their investment returns, which are mostly interest,\u00a0and what they <abbr class='c2c-text-hover' title='\u2018place on the right of the account called\u2019. It can mean either increasing or decreasing for different accounts'>credit<\/abbr> as interest on\u00a0these\u00a0consumer\u00a0products.<\/li>\n\n\n\n<li>During times of persistently low interest rates,&nbsp;the spread between interest earned and interest credited&nbsp;is compressed, which not only reduces net income for the insurer but also puts them at risk&nbsp;of&nbsp;being unable&nbsp;to meet contractually guaranteed obligations to policyholders.&nbsp;<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-7 kt-inner-tab14017_de2906-1a\"><div class=\"kt-tab-inner-content-inner\">\n<div class=\"wp-block-esab-accordion esab-823bew4u\" data-mode=\"global\"><div class=\"esab__container\">\n<div class=\"wp-block-esab-accordion-child\"><div class=\"esab__head\" role=\"button\" aria-expanded=\"false\"><div class=\"esab__heading_txt\"><p class=\"esab__heading_tag\"><\/p><\/div><div class=\"esab__icon\"><div class=\"esab__collapse\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m3.5 20.5c-4.7-4.7-4.7-12.3 0-17 4.7-4.7 12.3-4.7 17 0 4.6 4.7 4.6 12.3 0 17-4.7 4.6-12.3 4.6-17 0zm0.9-0.9c4.2 4.2 11 4.2 15.2 0 4.2-4.2 4.2-11 0-15.2-4.2-4.3-11-4.3-15.2 0-4.3 4.2-4.3 11 0 15.2z\"><\/path><path d=\"m11.4 15.9v-3.3h-3.3c-0.3 0-0.6-0.3-0.6-0.6 0-0.4 0.3-0.6 0.6-0.6h3.3v-3.3c0-0.3 0.3-0.6 0.6-0.6 0.3 0 0.6 0.3 0.6 0.6v3.3h3.3c0.3 0 0.6 0.2 0.6 0.6q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2h-3.3v3.3q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2c-0.4 0-0.6-0.3-0.6-0.6z\"><\/path><\/svg> <\/div><div class=\"esab__expand\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m12 24c-6.6 0-12-5.4-12-12 0-6.6 5.4-12 12-12 6.6 0 12 5.4 12 12 0 6.6-5.4 12-12 12zm10.6-12c0-5.9-4.7-10.6-10.6-10.6-5.9 0-10.6 4.7-10.6 10.6 0 5.9 4.7 10.6 10.6 10.6 5.9 0 10.6-4.7 10.6-10.6z\"><\/path><path d=\"m5.6 11.3h12.8v1.4h-12.8z\"><\/path><\/svg> <\/div><\/div><\/div><div class=\"esab__body\">\n<p>Insurance companies hold a diverse range of <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>assets<\/abbr> to meet their financial obligations and ensure long-term solvency. These <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>assets<\/abbr> generally fall into two main categories:<\/p>\n\n\n\n<p><strong>1. Investment <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>Assets<\/abbr>:<\/strong><\/p>\n\n\n\n<p>They offer potentially high returns but also present unique risks and require careful due <abbr class='c2c-text-hover' title='the quality of working carefully and with a lot of effort.'>diligence<\/abbr>.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Fixed-income securities:<\/strong>&nbsp;<\/li>\n\n\n\n<li>These are the most common type of asset, including government bonds, <abbr class='c2c-text-hover' title='a large company or group of companies that is controlled together as a single organization.'>corporate<\/abbr> bonds, and other debt instruments. <\/li>\n\n\n\n<li>They offer relatively stable returns and low risk, making them suitable for meeting <abbr class='c2c-text-hover' title='the amount of money that a person or organisation owes. legal responsibility for something'>liabilities<\/abbr> with fixed maturities like life insurance payouts.<\/li>\n\n\n\n<li><strong>Equities:<\/strong>&nbsp;<\/li>\n\n\n\n<li>Stocks represent ownership in companies and generally offer higher potential returns but also come with higher volatility. <\/li>\n\n\n\n<li>Some insurers may invest in equities to achieve higher long-term returns, but they do so strategically to manage risk.<\/li>\n\n\n\n<li><strong>Real estate:<\/strong>&nbsp;<\/li>\n\n\n\n<li>Investing in properties can provide stable income through rent collection and potential for <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>capital<\/abbr> appreciation. <\/li>\n\n\n\n<li>While offering diversification, real estate investments require specialised expertise and are subject to market fluctuations.<\/li>\n\n\n\n<li><strong>Alternative investments:<\/strong>&nbsp;<\/li>\n\n\n\n<li>This category includes <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>assets<\/abbr> like private <abbr class='c2c-text-hover' title='is the net amount of funds invested in a business by its owners, plus any retained earnings.'>equity<\/abbr>, infrastructure projects, and hedge funds. <\/li>\n<\/ul>\n\n\n\n<p><strong>2. Liquidity <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>Assets<\/abbr>:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Cash and cash equivalents:<\/strong>&nbsp;\n<ul class=\"wp-block-list\">\n<li>Holding readily available cash ensures the ability to meet immediate claims and operational expenses. <\/li>\n\n\n\n<li>These typically offer low returns but high liquidity.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Short-term securities:<\/strong>\n<ul class=\"wp-block-list\">\n<li>Similar to fixed-income investments, but with shorter maturities (less than a year), offering slightly higher returns than cash with moderate liquidity.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><strong>3. Specific Asset Allocation Varies:<\/strong><\/p>\n\n\n\n<p>The ideal mix of these <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>assets<\/abbr> depends on various factors, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Type of insurance:<\/strong>&nbsp;Life insurers have different solvency requirements and risk profiles compared to property and casualty insurers, influencing their asset allocation.<\/li>\n\n\n\n<li><strong><abbr class='c2c-text-hover' title='the amount of money that a person or organisation owes. legal responsibility for something'>Liabilities<\/abbr>:<\/strong>&nbsp;The timing and size of future payouts impact the need for matching <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>assets<\/abbr> with predictable cash flows.<\/li>\n\n\n\n<li><strong>Risk tolerance:<\/strong>&nbsp;Each insurer balances risks and returns based on their specific risk appetite and business strategy.<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-esab-accordion-child\"><div class=\"esab__head\" role=\"button\" aria-expanded=\"false\"><div class=\"esab__heading_txt\"><p class=\"esab__heading_tag\"><strong>Two Financial Risks<\/strong><\/p><\/div><div class=\"esab__icon\"><div class=\"esab__collapse\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m3.5 20.5c-4.7-4.7-4.7-12.3 0-17 4.7-4.7 12.3-4.7 17 0 4.6 4.7 4.6 12.3 0 17-4.7 4.6-12.3 4.6-17 0zm0.9-0.9c4.2 4.2 11 4.2 15.2 0 4.2-4.2 4.2-11 0-15.2-4.2-4.3-11-4.3-15.2 0-4.3 4.2-4.3 11 0 15.2z\"><\/path><path d=\"m11.4 15.9v-3.3h-3.3c-0.3 0-0.6-0.3-0.6-0.6 0-0.4 0.3-0.6 0.6-0.6h3.3v-3.3c0-0.3 0.3-0.6 0.6-0.6 0.3 0 0.6 0.3 0.6 0.6v3.3h3.3c0.3 0 0.6 0.2 0.6 0.6q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2h-3.3v3.3q0 0.2-0.2 0.4-0.2 0.2-0.4 0.2c-0.4 0-0.6-0.3-0.6-0.6z\"><\/path><\/svg> <\/div><div class=\"esab__expand\"> <svg version=\"1.2\" viewBox=\"0 0 24 24\" width=\"24\" height=\"24\"><path fill-rule=\"evenodd\" d=\"m12 24c-6.6 0-12-5.4-12-12 0-6.6 5.4-12 12-12 6.6 0 12 5.4 12 12 0 6.6-5.4 12-12 12zm10.6-12c0-5.9-4.7-10.6-10.6-10.6-5.9 0-10.6 4.7-10.6 10.6 0 5.9 4.7 10.6 10.6 10.6 5.9 0 10.6-4.7 10.6-10.6z\"><\/path><path d=\"m5.6 11.3h12.8v1.4h-12.8z\"><\/path><\/svg> <\/div><\/div><\/div><div class=\"esab__body\">\n<p><strong>Financial risks &#8211; <abbr class='c2c-text-hover' title='\u2018place on the right of the account called\u2019. It can mean either increasing or decreasing for different accounts'>Credit<\/abbr> and counterparties<\/strong><\/p>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Risk<\/strong><\/td><td><strong>Impact<\/strong><\/td><td><strong>Risk <\/strong><strong>Mitigation<\/strong><\/td><\/tr><tr><td>&#8211; Growth of the annuity market poses a significant increase in risk to life insurers. <br>&#8211; Particular issue &#8211; backing annuities by moving into alternative <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>assets<\/abbr>.<\/td><td>A number of annuity writers are backing their <abbr class='c2c-text-hover' title='the amount of money that a person or organisation owes. legal responsibility for something'>liabilities<\/abbr> with <abbr class='c2c-text-hover' title='is the net amount of funds invested in a business by its owners, plus any retained earnings.'>equity<\/abbr>-release mortgages or other non-standard asset classes, which may be unsustainable in the long term.<\/td><td>&#8211; Ensure asset classes being considered are fully understood. <br>&#8211; Seek permission from the regulator, where necessary.<br>&#8211; Actively monitor portfolios for different and unexpected risks.<\/td><\/tr><\/tbody><\/table><figcaption class=\"wp-element-caption\"><strong>Financial risks &#8211; <abbr class='c2c-text-hover' title='\u2018place on the right of the account called\u2019. It can mean either increasing or decreasing for different accounts'>Credit<\/abbr> and counterparties<\/strong><\/figcaption><\/figure>\n\n\n<div class=\"wp-block-ub-divider ub_divider ub-divider-orientation-horizontal\" id=\"ub_divider_49dd1663-9b33-447c-9279-8cb7bb860d38\"><div class=\"ub_divider_wrapper\" style=\"position: relative; margin-bottom: 2px; width: 100%; height: 2px; \" data-divider-alignment=\"center\"><div class=\"ub_divider_line\" style=\"border-top: 2px solid #ccc; margin-top: 2px; \"><\/div><\/div><\/div>\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><strong>Financial risks &#8211; Low-interest rate environment impact<\/strong><\/p>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Risk<\/strong><\/td><td><strong>Impact<\/strong><\/td><td><strong>Risk Mitigation<\/strong><\/td><\/tr><tr><td>&#8211; The impact of low interest rate environment depends on the extent to which life insurers are asset and liability mismatched. <br>&#8211; Margins for <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>assets<\/abbr> being managed may be hit as investment returns and profits are reduced.&nbsp;<\/td><td>&#8211; Depends on the structure of the portfolio. <br>&#8211; Life insurers typically have high bond allocations. <br>&#8211; Interest risk hedging activities could put pressure on bond yields causing: <br>\u2022 reduction in firm\u2019s solvency levels; <br>\u2022 restricted investment policies;<br>\u2022 restricted ability to write new business; <br>\u2022 reduced new business profitability.&nbsp; <br>\u2022 future &#8211; may affect the availability of own funds after the effect of subsidiaries to the group under the <abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr> group solvency calculations framework<\/td><td>Ensure there is <br>\u2022 appropriate assessment of risk; and <br>\u2022 <abbr class='c2c-text-hover' title='to organise and perform a particular activity.'>conduct<\/abbr> stress testing exercises. <br>\u2022 strategy planning should assess vulnerabilities including second-order and behavioural effects and amplification issues.<\/td><\/tr><\/tbody><\/table><figcaption class=\"wp-element-caption\"><strong>Financial risks &#8211; Low-interest rate environment impact<\/strong><\/figcaption><\/figure>\n\n\n\n<p><\/p>\n<\/div><\/div>\n<\/div><\/div>\n\n\n\n<p><\/p>\n\n\n<div class=\"wp-block-ub-divider ub_divider ub-divider-orientation-horizontal\" id=\"ub_divider_2f4dbdbd-9af4-461c-862d-f77456bfdf32\"><div class=\"ub_divider_wrapper\" style=\"position: relative; margin-bottom: 2px; width: 100%; height: 2px; \" data-divider-alignment=\"center\"><div class=\"ub_divider_line\" style=\"border-top: 2px solid #ccc; margin-top: 2px; \"><\/div><\/div><\/div>\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-8 kt-inner-tab14017_934a16-e4\"><div class=\"kt-tab-inner-content-inner\">\n<p><strong>Product Risks \u2013 Enhanced annuities<\/strong><\/p>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Risk<\/strong><\/td><td><strong>Impact<\/strong><\/td><td><strong>Risk <\/strong><strong>Mitigation<\/strong><\/td><\/tr><tr><td>Enhanced annuities and other non-standard annuities offer higher annuity rates to people whose lifestyle or medical conditions cause their life expectancy to fall below the expected mortality rates<\/td><td>&#8211; Low yield environment and difficult macroeconomic conditions mean people are incentivised to <abbr class='c2c-text-hover' title='obtain something from (a specified source). to get or obtain something.'>derive<\/abbr> more value from their savings. <br>&#8211; They may be more use of&nbsp; non-standard products against a backdrop of falling standard annuity rates<\/td><td>&#8211; Monitor medical advancements affecting future life expectancy that annuities have been provided for. <br>&#8211; Ensure books of business do not grow unsustainably. <br>&#8211; Ensure credible contingency plans are in place for the treatment of <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>assets<\/abbr> for <abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr>. <br>&#8211; Firms may wish to consider stress testing their portfolios for scenarios such as withdrawal and\/or reduction of reinsurance covers or significant market valuations changes in the future.<\/td><\/tr><\/tbody><\/table><figcaption class=\"wp-element-caption\"><strong>Product Risks \u2013 Enhanced annuities<\/strong><\/figcaption><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n<div class=\"wp-block-ub-divider ub_divider ub-divider-orientation-horizontal\" id=\"ub_divider_016f3881-d611-480f-909e-972fd2f287db\"><div class=\"ub_divider_wrapper\" style=\"position: relative; margin-bottom: 2px; width: 100%; height: 2px; \" data-divider-alignment=\"center\"><div class=\"ub_divider_line\" style=\"border-top: 2px solid #ccc; margin-top: 2px; \"><\/div><\/div><\/div>\n\n\n<p><\/p>\n\n\n\n<p><strong>Product risk \u2013 Platforms and <abbr class='c2c-text-hover' title='(RDR) is a Financial Conduct Authority (FCA) initiative that aims to provide greater clarity about different types of financial services available.'>Retail Distribution Review<\/abbr><\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Risk<\/strong><\/td><td><strong>Impact<\/strong><\/td><td><strong>Risk<\/strong><strong> <\/strong><strong>Mitigation<\/strong><\/td><\/tr><tr><td><abbr class='c2c-text-hover' title='(RDR) is a Financial Conduct Authority (FCA) initiative that aims to provide greater clarity about different types of financial services available.'>Retail Distribution Review<\/abbr> implemented in December 2012.&nbsp; <br>A fundamental change to the distribution of retail investments could affect consumer behaviour, preference and changes in products and markets attractive to firms.<\/td><td>Back books (consists of old policies that remain on the books as premium-paying policies) steadily declining as maturities and surrenders exceed new business premiums. <br>The key risk &#8211; life insurers\u2019 existing books of business decline significantly faster than expected across the sector before new strategies are developed and providing steady cash flow.<\/td><td>Immediate risk of failure is low.&nbsp; Monitoring is required to ensure sector trends of a persistent decreasing back book do not accelerate faster than expected significantly increasing the impact.<\/td><\/tr><\/tbody><\/table><figcaption class=\"wp-element-caption\"><strong>Product risk \u2013 Platforms and <abbr class='c2c-text-hover' title='(RDR) is a Financial Conduct Authority (FCA) initiative that aims to provide greater clarity about different types of financial services available.'>Retail Distribution Review<\/abbr><\/strong><\/figcaption><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Note on Back books steadily declining<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>This decline is due to:\n<ul class=\"wp-block-list\">\n<li><strong>Policy maturing:<\/strong>&nbsp;Reaching the end of their term and paying out benefits.<\/li>\n\n\n\n<li><strong>Policyholders surrendering:<\/strong>&nbsp;Cancelling their policies before <abbr class='c2c-text-hover' title='The length of time that has to elapse before an asset matures or is repaid.'>maturity<\/abbr>, often resulting in reduced payouts.<\/li>\n\n\n\n<li><strong>No new business:<\/strong>&nbsp;These policies are not being replaced with new ones with higher premiums.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><strong>Significance of Decline:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The key risk lies in the&nbsp;<strong>faster-than-expected decline<\/strong>&nbsp;exceeding the life insurer&#8217;s ability to adapt.<\/li>\n\n\n\n<li>This can lead to:\n<ul class=\"wp-block-list\">\n<li><strong>Reduced cash flow:<\/strong>&nbsp;Lower overall premium income can impact the insurer&#8217;s ability to meet financial obligations.<\/li>\n\n\n\n<li><strong>Higher expenses:<\/strong>&nbsp;Maintaining reserves for existing policies while facing declining income can strain resources.<\/li>\n\n\n\n<li><strong>Profitability issues:<\/strong>&nbsp;Difficulty generating profits if costs exceed income.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><strong>Strategies to Mitigate Risk:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Developing new products:<\/strong>&nbsp;Launching updated policies with higher premiums to replace maturing ones.<\/li>\n\n\n\n<li><strong>Optimizing existing business:<\/strong>&nbsp;Retaining existing policyholders through better customer service and competitive offerings.<\/li>\n\n\n\n<li><strong>Risk management:<\/strong>&nbsp;Managing <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>assets<\/abbr> and <abbr class='c2c-text-hover' title='the amount of money that a person or organisation owes. legal responsibility for something'>liabilities<\/abbr> strategically to ensure solvency and profitability despite a smaller book of business.<\/li>\n<\/ul>\n\n\n<div class=\"wp-block-ub-divider ub_divider ub-divider-orientation-horizontal\" id=\"ub_divider_495a590b-7dd9-49d8-88ce-928edc38a35a\"><div class=\"ub_divider_wrapper\" style=\"position: relative; margin-bottom: 2px; width: 100%; height: 2px; \" data-divider-alignment=\"center\"><div class=\"ub_divider_line\" style=\"border-top: 2px solid #ccc; margin-top: 2px; \"><\/div><\/div><\/div>\n\n\n<h2 class=\"wp-block-heading\"><strong>Notes on The <abbr class='c2c-text-hover' title='(RDR) is a Financial Conduct Authority (FCA) initiative that aims to provide greater clarity about different types of financial services available.'>Retail Distribution Review<\/abbr> (RDR)<\/strong><\/h2>\n\n\n\n<p>It aimed to fundamentally change how retail investment products are sold to consumers. It introduced several key changes that could impact consumer behaviour, preferences, and product offerings:<\/p>\n\n\n\n<p><strong>Key Changes:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Abolished commission-based payments for financial advisors:<\/strong>&nbsp;Previously, advisors earned commissions on the products they sold, potentially creating an incentive to recommend products based on the commission rather than suitability for the client. RDR replaced commissions with transparent fees paid directly by the client.<\/li>\n\n\n\n<li><strong>Enhanced advisor qualifications and training:<\/strong>&nbsp;RDR raised the minimum qualification level for financial advisors and required ongoing training to ensure they possess the necessary knowledge and skills to provide competent advice.<\/li>\n\n\n\n<li><strong>Focus on client suitability:<\/strong>&nbsp;Advisors are now required to <abbr class='c2c-text-hover' title='to organise and perform a particular activity.'>conduct<\/abbr> thorough assessments of the client&#8217;s needs, risk tolerance, and investment goals before recommending any product. This shift emphasizes personalized advice tailored to individual circumstances.<\/li>\n\n\n\n<li><strong>Increased transparency and <abbr class='c2c-text-hover' title='the purchase price, including the additional cost of bringing the product or service to its present location or condition, such as delivery charges. e.g.'>cost<\/abbr> disclosure:<\/strong>&nbsp;Consumers receive clearer information about fees, charges, and potential risks associated with different investment options.<\/li>\n<\/ul>\n\n\n\n<p><strong>Potential Impact:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Consumer behavior:<\/strong>&nbsp;Consumers may become more engaged in their investment decisions as they directly pay for advice and have access to clearer information. This could lead to increased demand for personalized advice and greater scrutiny of product features and costs.<\/li>\n\n\n\n<li><strong>Consumer preferences:<\/strong>&nbsp;Consumers may seek out advisors with specialized expertise aligned with their specific needs and investment goals. This could lead to a shift towards fee-based advisors focusing on long-term wealth management rather than transactional sales.<\/li>\n\n\n\n<li><strong>Product and market attractiveness:<\/strong>&nbsp;Firms may need to adapt their product offerings to become more competitive in a fee-based environment. This could lead to an increased focus on low-<abbr class='c2c-text-hover' title='the purchase price, including the additional cost of bringing the product or service to its present location or condition, such as delivery charges. e.g.'>cost<\/abbr> index funds, passive investing strategies, and products with transparent fee structures.<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-9 kt-inner-tab14017_e51a80-67\"><div class=\"kt-tab-inner-content-inner\">\n<p><strong><strong>Financial risks &#8211; Low interest rate environment impact<\/strong><\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Risk<\/strong><\/td><td><strong>Impact<\/strong><\/td><td><strong>Risk<\/strong><strong> <\/strong><strong>Mitigation<\/strong><\/td><\/tr><tr><td>&#8211; Slow economic recovery places pressure on premiums, contracting market size, and lowering investment returns which affects profitability. <br>-These factors combined with competition, may result in general insurance firms to seek out more reward for their risk.<\/td><td>&#8211; Firms seeking to improve returns may attract significant asset risks to their <abbr class='c2c-text-hover' title='(Statement of Financial Position)shows assets, liabilities and equity (capital). The statement lists the assets, liabilities, and equity of an organization as of the report date. As such, it provides a snapshot of the financial condition of a business as of a specific date. It is one of the financial statements, and so is commonly presented alongside the income statement and statement of cash flows.'>balance sheet<\/abbr>. <br>&#8211; Unprofitable <abbr class='c2c-text-hover' title='sign and accept liability under (an insurance policy), thus guaranteeing payment in case loss or damage occurs \/ (of a bank or other financial institution) pledge to buy all the unsold shares in (an issue of new shares).'>underwriting<\/abbr> (issuing policies at premiums to attract customers in short-term that don&#8217;t adequately cover potential future claims) =&gt; can result in firms launching new products writing new and\/or growing the business in current and new territories with a lack of data, knowledge or experience.<\/td><td>Continue to focus on: <br>\u2022future <abbr class='c2c-text-hover' title='sign and accept liability under (an insurance policy), thus guaranteeing payment in case loss or damage occurs \/ (of a bank or other financial institution) pledge to buy all the unsold shares in (an issue of new shares).'>underwriting<\/abbr> strategies <br>\u2022pricing policies and <br>\u2022monitoring investment strategies.<\/td><\/tr><\/tbody><\/table><figcaption class=\"wp-element-caption\"><strong><strong>Financial risks &#8211; Low interest rate environment impact<\/strong><\/strong><\/figcaption><\/figure>\n\n\n<div class=\"wp-block-ub-divider ub_divider ub-divider-orientation-horizontal\" id=\"ub_divider_78a47b18-7f8f-40be-af91-010bf55c89e7\"><div class=\"ub_divider_wrapper\" style=\"position: relative; margin-bottom: 2px; width: 100%; height: 2px; \" data-divider-alignment=\"center\"><div class=\"ub_divider_line\" style=\"border-top: 2px solid #ccc; margin-top: 2px; \"><\/div><\/div><\/div>\n\n\n<p><strong><strong>L<\/strong>ine of business risk \u2013 Inadequate reserving<\/strong><\/p>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Risk<\/strong><\/td><td><strong>Impact<\/strong><\/td><td><strong>Risk<\/strong><strong> <\/strong><strong>Mitigation<\/strong><\/td><\/tr><tr><td>Inadequate reserving by general insurers can: <br>\u2022understate the costs of claims; <br>\u2022create premium rate pricing adequacies;&nbsp; and <br>\u2022stress reserving risk <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>capital<\/abbr> requirements.<\/td><td>Inadequate reserving will strain business models and affect solvency <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>capital<\/abbr> levels. Coupled with: <br>\u2022competitive market pricing pressure; <br>\u2022changing supply and demand trends; <br>\u2022increased claims <abbr class='c2c-text-hover' title='Rate at which prices as a whole are increasing.'>inflation<\/abbr> costs; and <br>\u2022current low interest rate environment can result in pressure to alter an insurers behaviour in the current phase of the <abbr class='c2c-text-hover' title='sign and accept liability under (an insurance policy), thus guaranteeing payment in case loss or damage occurs \/ (of a bank or other financial institution) pledge to buy all the unsold shares in (an issue of new shares).'>underwriting<\/abbr> cycle.<\/td><td>Perform regular deep-dive <abbr class='c2c-text-hover' title='A reserve price is a minimum price that a seller would be willing to accept from a buyer. In an auction, the seller is not typically required to disclose the reserve price to potential buyers but the auctioner. If the reserve price is not met, the seller is not required to sell the item, even to the highest bidder.'>reserve<\/abbr> exercises to ensure that they understand their claim exposure fully. <br>Effective <abbr class='c2c-text-hover' title='A reserve price is a minimum price that a seller would be willing to accept from a buyer. In an auction, the seller is not typically required to disclose the reserve price to potential buyers but the auctioner. If the reserve price is not met, the seller is not required to sell the item, even to the highest bidder.'>reserve<\/abbr> governance is essential. <br>Ensure reserves are adequate by using correct booking of reserves with appropriate challenge.<\/td><\/tr><\/tbody><\/table><figcaption class=\"wp-element-caption\"><strong>GI line of business risk \u2013 Inadequate reserving<\/strong><\/figcaption><\/figure>\n\n\n<div class=\"wp-block-ub-divider ub_divider ub-divider-orientation-horizontal\" id=\"ub_divider_27eb3be8-8063-4f31-b910-030cebd1f7fa\"><div class=\"ub_divider_wrapper\" style=\"position: relative; margin-bottom: 2px; width: 100%; height: 2px; \" data-divider-alignment=\"center\"><div class=\"ub_divider_line\" style=\"border-top: 2px solid #ccc; margin-top: 2px; \"><\/div><\/div><\/div>\n\n\n<p><strong><strong>General Insurance <\/strong> line of business risk &#8211; UK flooding<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Risk<\/strong><\/td><td><strong>Impact<\/strong><\/td><td><strong>Risk<\/strong><strong> <\/strong><strong>Mitigation<\/strong><\/td><\/tr><tr><td>More than 30 major rivers in the UK that have extensive reach and are currently or were historically, multi-channelled. <br>These rivers represent significant points of increased vulnerability in the river network to increase flooding. Historic underinvestment in flood defenses and changing weather patterns have increased the risk.<\/td><td>More flooding is predicted in the UK and rates of river bed, bank erosion and floodplain sedimentation are also likely to accelerate. There remains the possibility that certain households will not be able to afford flood insurance as it becomes too costly.<\/td><td>Identify vulnerable points within their insured portfolio of household properties and maintain adequate reserves to manage these exposures. A new regime coming in mid 2015 is intended to ensure the continued widespread availability of flood insurance to high-risk households.&nbsp; Follows the expiry of the Statement of Principles.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n<div class=\"wp-block-ub-divider ub_divider ub-divider-orientation-horizontal\" id=\"ub_divider_73c4d683-7453-4e48-b0cc-ce112af8baf3\"><div class=\"ub_divider_wrapper\" style=\"position: relative; margin-bottom: 2px; width: 100%; height: 2px; \" data-divider-alignment=\"center\"><div class=\"ub_divider_line\" style=\"border-top: 2px solid #ccc; margin-top: 2px; \"><\/div><\/div><\/div>\n\n\n<p><strong><strong>General Insurance <\/strong>line of business risk &#8211; Periodic Payment Orders (PPOs)<\/strong><\/p>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Risk<\/strong><\/td><td><strong>Impact<\/strong><\/td><td><strong>Risk<\/strong><strong> <\/strong><strong>Mitigation<\/strong><\/td><\/tr><tr><td>&#8211; Since their introduction through the 2003 Courts Act, &#8211; PPOs have begun to change the landscape of how large bodily injury (BI) claims are paid in the UK. <br>&#8211; PPOs are an alternative to lump sum payments. <br>&#8211; Under a PPO settlement an insurer pays a semi-annual <abbr class='c2c-text-hover' title='to be the same as something, or to have the same effect as something'>amount to<\/abbr> the claimant for the remainder of their life, like an annuity.<\/td><td>&#8211; This payment method transfers to the insurer risks such as longevity, investment and <abbr class='c2c-text-hover' title='Rate at which prices as a whole are increasing.'>inflation<\/abbr>. <br>&#8211; PPOs now pose a material current and future risk for motor insurers. <br>&#8211; It is estimated that, within a decade, 25% of general insurer motor reserves could be formed of PPO commitments.<\/td><td>It is essential for: <br>\u2022 Firms to actively track and monitor potential PPO claims. <br>\u2022 Have specific reserving, modelling and methodology in place to minimise the longevity, investment and <abbr class='c2c-text-hover' title='Rate at which prices as a whole are increasing.'>inflation<\/abbr> risk.<\/td><\/tr><\/tbody><\/table><figcaption class=\"wp-element-caption\">Note: Traditionally,&nbsp;legal settlements involving damages were paid as a&nbsp;<strong>one-time lump sum<\/strong>. PPOs offer an alternative,&nbsp;paying the claimant&nbsp;<strong>regular payments<\/strong>&nbsp;over their remaining lifetime.<\/figcaption><\/figure>\n\n\n\n<p><\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-10 kt-inner-tab14017_9768e6-fd\"><div class=\"kt-tab-inner-content-inner\">\n<p><strong>Technology risk &#8211; Cyberattacks<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Risk<\/strong><\/td><td><strong>Impact<\/strong><\/td><td><strong>Risk<\/strong><strong> <\/strong><strong>Mitigation<\/strong><\/td><\/tr><tr><td>Many firms are leaner so are opting to use cloud computing, offshoring data and processes to third party firms. <br>Critical functions outsourced include catastrophe modelling, actuarial analysis and compliance functions.<\/td><td>&#8211; A cyber attack could affect a firm\u2019s ability to process premiums and issue insurance contracts affecting cashflows and covers \u2013 particularly an issue for compulsory insurances. <br>&#8211; A cloud service provider concentration could become a second order risk if such providers were subject to multiple cyber-attacks causing a failure of services.<\/td><td>Ensure and monitor that third party firms provide the security and service that they are contracted to deliver. <br>Constantly monitor firewalls. <br>Rectify breaches immediately to minimise security risks is paramount. <br>Limit staff use of mobile devices to minimise damage to&nbsp; high risk critical areas of the infrastructure.<\/td><\/tr><\/tbody><\/table><\/figure>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-11 kt-inner-tab14017_d1b1ab-c1\"><div class=\"kt-tab-inner-content-inner\">\n<p><strong>Stakeholder risk &#8211; Shadow banking activities<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Risk<\/strong><\/td><td><strong>Impact<\/strong><\/td><td><strong>Risk<\/strong><strong> <\/strong><strong>Mitigation<\/strong><\/td><\/tr><tr><td>&#8211; Shadow banking activities can cover non-banking financial firms that provide services similar to traditional commercial banks where there is a <abbr class='c2c-text-hover' title='is when banks take short-term sources of finance, such as deposits from savers, and turn them into long-term borrowings, such as mortgages.'>maturity transformation<\/abbr>. <br>&#8211; Such activities could include <abbr class='c2c-text-hover' title='\u2018place on the right of the account called\u2019. It can mean either increasing or decreasing for different accounts'>credit<\/abbr> investment vehicles (e.g. investment funds, mutual funds and trusts) that have a cash management or very low risk investment objective. <br>&#8211; Investments may also occur in unregulated markets, so are not visible in conventional balance sheets, making it difficult to assess exposures.<\/td><td>&#8211; Non-traded <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>assets<\/abbr> are highly risky and volatile and may cause significant losses in a short timeframe. <br>&#8211; They may also be less liquid in times of stress and valuations may be difficult to quantify.<\/td><td>&#8211; Firms engage with the regulator to ensure products are appropriate. <br>&#8211; Once deemed appropriate firms may require expert advise when transacting in these products. <br>&#8211; Firms should regularly monitor asset exposures to minimise risk and volatility.<\/td><\/tr><\/tbody><\/table><\/figure>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-12 kt-inner-tab14017_e56292-76\"><div class=\"kt-tab-inner-content-inner\">\n<p><strong>Black Swan &#8211; Combined effect of a financial, catastrophe &amp; pandemic events<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Risk<\/strong><\/td><td><strong>Impact<\/strong><\/td><td><strong>Risk<\/strong><strong> <\/strong><strong>Mitigation<\/strong><\/td><\/tr><tr><td>Simultaneous shocks to the: <br><br>\u2022global economic system <br><br>\u2022natural catastrophes <br><br>\u2022pandemics could trigger insured loss events which could test the resilience of insurers.<br><\/td><td>&#8211; Certain scenarios could lead to loss in a large number of life products and GI lines of business. <br><br>&#8211; Life and health assurers will be adversely affected in a pandemic event and GI insurers could experience unprecedented liability claims and an accumulation or large value claims following a catastrophe event. <br><br>&#8211; Claims could also come from secondary impacts to society. <br><br>&#8211; A firms solvency <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>capital<\/abbr> could be adversely affected if there is a \u201c<abbr class='c2c-text-hover' title='The tendency of investors to move toward safer investments (often government bonds) during periods of high economic uncertainty.'>flight to quality<\/abbr>\u201d at the same time due to investor unpredictability.<\/td><td>&#8211; Some policies may be hit unexpectedly by claims, the insurance industry should clarify coverage intentions sooner rather than later to ensure contract certainty. <br><br>&#8211; Firms ensure they have an understanding of&nbsp; the financial markets second order, behavioural and amplification issues affecting their investments <br><br>-Firms ensure they understand their concentration of exposures for natural catastrophe (for modelled and unmodelled perils) <br><br>&#8211; Pandemic contingency plans should aim to ensure continuity of essential operations during an extended period of high illness rates in the workforce, suppliers, and customers.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<p>Source: <strong>Andrea French<\/strong>, Technical Specialist, Insurance Sector Team, the PRA<\/p>\n<\/div><\/div>\n<\/div><\/div><\/div>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-pane kt-accordion-pane kt-accordion-pane-6 kt-pane14017_9ef2d0-bc\"><div class=\"kt-accordion-header-wrap\"><button class=\"kt-blocks-accordion-header kt-acccordion-button-label-show\" type=\"button\"><span class=\"kt-blocks-accordion-title-wrap\"><span class=\"kt-blocks-accordion-title\"><strong>3.<\/strong> <strong><abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr><\/strong><\/span><\/span><span class=\"kt-blocks-accordion-icon-trigger\"><\/span><\/button><\/div><div class=\"kt-accordion-panel kt-accordion-panel-hidden\"><div class=\"kt-accordion-panel-inner\"><style>.kt-tabs-id14017_f6e1ce-1e > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;border-top-left-radius:0px;border-top-right-radius:0px;border-bottom-right-radius:0px;border-bottom-left-radius:0px;padding-top:var(--global-kb-spacing-sm, 1.5rem);padding-right:var(--global-kb-spacing-sm, 1.5rem);padding-bottom:var(--global-kb-spacing-sm, 1.5rem);padding-left:var(--global-kb-spacing-sm, 1.5rem);background:var(--global-palette9, #ffffff);}.wp-block-kadence-tabs .kt-tabs-id14017_f6e1ce-1e > .kt-tabs-title-list li{margin-top:0px;margin-right:8px;margin-bottom:0px;margin-left:0px;}.wp-block-kadence-tabs .kt-tabs-id14017_f6e1ce-1e > .kt-tabs-title-list li:last-child{margin-right:0px;}.wp-block-kadence-tabs .kt-tabs-id14017_f6e1ce-1e > .kt-tabs-title-list li .kt-tab-title, .wp-block-kadence-tabs .kt-tabs-id14017_f6e1ce-1e > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title{line-height:1.4em;font-weight:regular;font-style:normal;border-top-width:0px;border-right-width:0px;border-bottom-width:0px;border-left-width:0px;border-top-left-radius:4px;border-top-right-radius:4px;border-bottom-right-radius:0px;border-bottom-left-radius:0px;padding-top:8px;padding-right:20px;padding-bottom:8px;padding-left:20px;border-color:var(--global-palette7, #eeeeee);color:var(--global-palette4, #2D3748);background:var(--global-palette7, #eeeeee);}.wp-block-kadence-tabs .kt-tabs-id14017_f6e1ce-1e > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title{margin-top:0px;margin-right:8px;margin-bottom:0px;margin-left:0px;}.wp-block-kadence-tabs .kt-tabs-id14017_f6e1ce-1e > .kt-tabs-title-list li .kt-tab-title:hover, .wp-block-kadence-tabs .kt-tabs-id14017_f6e1ce-1e > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title:hover{border-color:var(--global-palette7, #eeeeee);color:var(--global-palette3, #1A202C);background:var(--global-palette8, #F7FAFC);}.wp-block-kadence-tabs .kt-tabs-id14017_f6e1ce-1e > .kt-tabs-title-list li.kt-tab-title-active .kt-tab-title, .wp-block-kadence-tabs .kt-tabs-id14017_f6e1ce-1e > .kt-tabs-content-wrap > .kt-tabs-accordion-title.kt-tab-title-active .kt-tab-title{border-color:var(--global-palette7, #eeeeee);color:#ffffff;background:#0a6689;}@media all and (max-width: 1024px){.kt-tabs-id14017_f6e1ce-1e > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;}}@media all and (max-width: 767px){.kt-tabs-id14017_f6e1ce-1e > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;}}<\/style>\n<div class=\"wp-block-kadence-tabs alignnone\"><div class=\"kt-tabs-wrap kt-tabs-id14017_f6e1ce-1e kt-tabs-has-4-tabs kt-active-tab-1 kt-tabs-layout-tabs kt-tabs-tablet-layout-inherit kt-tabs-mobile-layout-inherit kt-tab-alignment-left \"><ul class=\"kt-tabs-title-list\"><li id=\"tab-strongsolvencyiistrong\" class=\"kt-title-item kt-title-item-1 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-active\"><a href=\"#tab-strongsolvencyiistrong\" data-tab=\"1\" class=\"kt-tab-title kt-tab-title-1 \"><span class=\"kt-title-text\"><strong><abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr><\/strong><\/span><\/a><\/li><li id=\"tab-strongsolvencyii-postbrexitstrong\" class=\"kt-title-item kt-title-item-2 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongsolvencyii-postbrexitstrong\" data-tab=\"2\" class=\"kt-tab-title kt-tab-title-2 \"><span class=\"kt-title-text\"><strong><abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr> &#8211; Post Brexit<\/strong><\/span><\/a><\/li><li id=\"tab-strongeuropeaninsuranceandoccupationalpensionsauthorityeiopastrong\" class=\"kt-title-item kt-title-item-3 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongeuropeaninsuranceandoccupationalpensionsauthorityeiopastrong\" data-tab=\"3\" class=\"kt-tab-title kt-tab-title-3 \"><span class=\"kt-title-text\"><strong>European Insurance and Occupational Pensions Authority (EIOPA)<\/strong><\/span><\/a><\/li><li id=\"tab-strongusefulresourcesstrong\" class=\"kt-title-item kt-title-item-4 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongusefulresourcesstrong\" data-tab=\"4\" class=\"kt-tab-title kt-tab-title-4 \"><span class=\"kt-title-text\"><strong>Useful resources<\/strong><\/span><\/a><\/li><\/ul><div class=\"kt-tabs-content-wrap\">\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-1 kt-inner-tab14017_bacb7c-c0\"><div class=\"kt-tab-inner-content-inner\">\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.eiopa.europa.eu\/browse\/regulation-and-policy\/solvency-ii_en#:~:text=Solvency%20II%20is%20the%20prudential,protection%20of%20policyholders%20and%20beneficiaries.\" data-type=\"link\" data-id=\"https:\/\/www.eiopa.europa.eu\/browse\/regulation-and-policy\/solvency-ii_en#:~:text=Solvency%20II%20is%20the%20prudential,protection%20of%20policyholders%20and%20beneficiaries.\"><abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr><\/a> is an European Union Directive which came into operation in 2016. <\/li>\n\n\n\n<li><abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr> sets out requirements applicable to insurance and reinsurance companies in the EU with the aim to ensure the&nbsp;<strong>adequate protection of policyholders and beneficiaries.<\/strong><\/li>\n\n\n\n<li><abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr> has a&nbsp;<strong>risk-based approach<\/strong>&nbsp;that enables to assess the \u201coverall solvency\u201d of insurance and reinsurance undertakings through quantitative and qualitative measures.<\/li>\n\n\n\n<li><a href=\"https:\/\/assets.publishing.service.gov.uk\/media\/5f89c6b48fa8f56add45a101\/Solvency_II_Call_for_Evidence.pdf\" data-type=\"link\" data-id=\"https:\/\/assets.publishing.service.gov.uk\/media\/5f89c6b48fa8f56add45a101\/Solvency_II_Call_for_Evidence.pdf\">The regime has been \u2018onshored\u2019 as part of the UK\u2019s preparations to leave the EU<\/a>\n<ul class=\"wp-block-list\">\n<li>the relevant legislation has been brought into UK law, <\/li>\n\n\n\n<li>legal changes have been made to ensure that <abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr> reflects the circumstances of the UK\u2019s withdrawal from the EU <\/li>\n\n\n\n<li>will continue to apply effectively in the UK after the end of the transition period that is, from 1 January 2021. <\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr> provides for a market consistent calculation of insurance <abbr class='c2c-text-hover' title='the amount of money that a person or organisation owes. legal responsibility for something'>liabilities<\/abbr> and risk-based calculation of <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>capital<\/abbr>. It also sets out the supervisory review process and reporting and transparency requirements for insurance firms.<\/li>\n\n\n\n<li><a href=\"https:\/\/www.bankofengland.co.uk\/prudential-regulation\/key-initiatives\/solvency-ii\">https:\/\/www.bankofengland.co.uk\/prudential-regulation\/key-initiatives\/solvency-ii<\/a><\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-2 kt-inner-tab14017_aaa9b5-e6\"><div class=\"kt-tab-inner-content-inner\">\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>PRA&#8217;s proposals to deliver <strong>significant reforms for <abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr>,<\/strong> which the PRA considers will lead to a more competitive and dynamic insurance sector in the UK, while maintaining high standards of policyholder protection<\/li>\n\n\n\n<li><strong>Proposal for Changes and its Potential Impact for Small Insurers<\/strong>\n<ul class=\"wp-block-list\">\n<li>An increase to the size thresholds at which small insurers are required to enter the <abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr> regime, to increase proportionality for smaller or newer insurance firms. This proposal would benefit small insurers that may be close to the current thresholds, either now or in the future.<\/li>\n\n\n\n<li>A simpler IM application process, a reduction in reporting costs for firms, and a more proportionate regime for smaller insurers via increased thresholds. \n<ul class=\"wp-block-list\">\n<li><strong>(IM): A new, streamlined set of rules for internal models (IM) where these are used by insurers to calculate their <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>capital<\/abbr> requirements<\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>The proposal to remove the FRR test would potentially lead to a one-off increase in own funds for a small number of firms, but the effect is not expected to be material.<\/li>\n\n\n\n<li><strong>Giving small firms more room to grow before being required to comply with <abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr> requirements<\/strong> which may also help them to compete more effectively in UK insurance markets.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image size-full\"><img data-opt-id=2142592742  data-opt-src=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:auto\/h:auto\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2024\/02\/Timeline-Reform-1.png\"  loading=\"lazy\" decoding=\"async\" width=\"679\" height=\"422\" src=\"data:image/svg+xml,%3Csvg%20viewBox%3D%220%200%20100%%20100%%22%20width%3D%22100%%22%20height%3D%22100%%22%20xmlns%3D%22http%3A%2F%2Fwww.w3.org%2F2000%2Fsvg%22%3E%3Crect%20width%3D%22100%%22%20height%3D%22100%%22%20fill%3D%22transparent%22%2F%3E%3C%2Fsvg%3E\" alt=\"\" class=\"wp-image-27798\" old-srcset=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:679\/h:422\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2024\/02\/Timeline-Reform-1.png 679w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:300\/h:186\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2024\/02\/Timeline-Reform-1.png 300w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:360\/h:224\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2024\/02\/Timeline-Reform-1.png 360w\" \/><\/figure>\n\n\n\n<p>See <a href=\"https:\/\/www.bankofengland.co.uk\/-\/media\/boe\/files\/prudential-regulation\/consultation-paper\/2023\/june\/cp1223.pdf\" data-type=\"link\" data-id=\"https:\/\/www.bankofengland.co.uk\/-\/media\/boe\/files\/prudential-regulation\/consultation-paper\/2023\/june\/cp1223.pdf\">page 14<\/a> (consultation paper (CP))<\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-3 kt-inner-tab14017_43135d-f3\"><div class=\"kt-tab-inner-content-inner\">\n<p><abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr> supervision involves a two-tiered approach with two main organizations playing key roles:<\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><strong>1. National Supervisory Authorities (NSAs):<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Primary responsibility:<\/strong>&nbsp;Each European Union (EU) member state has its own&nbsp;<strong>National Supervisory Authority (NSA)<\/strong>.&nbsp;These NSAs hold the&nbsp;<strong>primary responsibility for supervising and enforcing <abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr> within their respective jurisdictions<\/strong>.&nbsp;This includes:\n<ul class=\"wp-block-list\">\n<li>Assessing individual insurance and reinsurance companies&#8217; compliance with the regulations.<\/li>\n\n\n\n<li>Conducting risk assessments and requiring corrective actions if necessary.<\/li>\n\n\n\n<li>Granting and withdrawing licenses.<\/li>\n\n\n\n<li>Investigating potential breaches and imposing sanctions.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<p><strong>2. European Insurance and Occupational Pensions Authority (EIOPA):<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The European Insurance and Occupational Pensions Authority (EIOPA) is a European Union financial regulatory institution.<\/li>\n\n\n\n<li>EIOPA acts as the&nbsp;<strong>central oversight body<\/strong>&nbsp;for <abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr> implementation across the EU.&nbsp;<\/li>\n\n\n\n<li>Its main functions include:\n<ul class=\"wp-block-list\">\n<li><strong>Developing implementing technical standards and guidelines<\/strong>&nbsp;to clarify and supplement the <abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr> Directive.<\/li>\n\n\n\n<li><strong>Promoting consistent supervisory practices<\/strong>&nbsp;among NSAs through peer reviews and guidance.<\/li>\n\n\n\n<li><strong>Mediating disputes<\/strong>&nbsp;between NSAs regarding supervisory decisions.<\/li>\n\n\n\n<li><strong>Conducting stress tests<\/strong>&nbsp;and risk assessments at the EU level.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-4 kt-inner-tab14017_d556ca-8d\"><div class=\"kt-tab-inner-content-inner\">\n<ul class=\"wp-block-list\">\n<li>Websites<\/li>\n\n\n\n<li>Smaller Insurers Webpages<\/li>\n\n\n\n<li><a href=\"http:\/\/www.bankofengland.co.uk\/pra\/Pages\/supervision\/smallinsurers\/default.aspx\">http:\/\/www.bankofengland.co.uk\/pra\/Pages\/supervision\/smallinsurers\/default.aspx<\/a><\/li>\n\n\n\n<li><abbr class='c2c-text-hover' title='is the prudential regime for insurance and reinsurance undertakings in the EU. It has entered into force in January 2016'>Solvency II<\/abbr> webpages on Bank of England website<\/li>\n\n\n\n<li>www.bankofengland.co.uk\/Solvency2<\/li>\n\n\n\n<li>European Commission website<\/li>\n\n\n\n<li>http:\/\/ec.europa.eu\/internal_market\/insurance\/solvency\/index_en.htm<\/li>\n\n\n\n<li>EIOPA website<\/li>\n\n\n\n<li>https:\/\/eiopa.europa.eu\/<\/li>\n\n\n\n<li>The PRA\u2019s approach to supervising liquidity and funding risks: https:\/\/www.bankofengland.co.uk\/-\/media\/boe\/files\/prudential-regulation\/supervisory-statement\/2021\/ss2415-jan-2022.pdf<\/li>\n<\/ul>\n<\/div><\/div>\n<\/div><\/div><\/div>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe title=\"The prudential regulation of insurers under Solvency II - Quarterly Bulletin article\" width=\"847\" height=\"476\" src=\"https:\/\/www.youtube.com\/embed\/8SrWoPns6_8?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-pane kt-accordion-pane kt-accordion-pane-7 kt-pane14017_8ed3ef-79\"><div class=\"kt-accordion-header-wrap\"><button class=\"kt-blocks-accordion-header kt-acccordion-button-label-show\" type=\"button\"><span class=\"kt-blocks-accordion-title-wrap\"><span class=\"kt-blocks-accordion-title\"><strong>4. Changing <abbr class='c2c-text-hover' title='to organise and perform a particular activity.'>Conduct<\/abbr> Regulation in the UK: The FCA<\/strong><\/span><\/span><span class=\"kt-blocks-accordion-icon-trigger\"><\/span><\/button><\/div><div class=\"kt-accordion-panel kt-accordion-panel-hidden\"><div class=\"kt-accordion-panel-inner\">\n<p><\/p>\n\n\n<style>.kt-tabs-id14017_e9e41d-62 > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;border-top-left-radius:0px;border-top-right-radius:0px;border-bottom-right-radius:0px;border-bottom-left-radius:0px;padding-top:var(--global-kb-spacing-sm, 1.5rem);padding-right:var(--global-kb-spacing-sm, 1.5rem);padding-bottom:var(--global-kb-spacing-sm, 1.5rem);padding-left:var(--global-kb-spacing-sm, 1.5rem);background:var(--global-palette9, #ffffff);}.wp-block-kadence-tabs .kt-tabs-id14017_e9e41d-62 > .kt-tabs-title-list li{margin-top:0px;margin-right:8px;margin-bottom:0px;margin-left:0px;}.wp-block-kadence-tabs .kt-tabs-id14017_e9e41d-62 > .kt-tabs-title-list li:last-child{margin-right:0px;}.wp-block-kadence-tabs .kt-tabs-id14017_e9e41d-62 > .kt-tabs-title-list li .kt-tab-title, .wp-block-kadence-tabs .kt-tabs-id14017_e9e41d-62 > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title{line-height:1.4em;font-weight:regular;font-style:normal;border-top-width:0px;border-right-width:0px;border-bottom-width:0px;border-left-width:0px;border-top-left-radius:4px;border-top-right-radius:4px;border-bottom-right-radius:0px;border-bottom-left-radius:0px;padding-top:8px;padding-right:20px;padding-bottom:8px;padding-left:20px;border-color:var(--global-palette7, #eeeeee);color:var(--global-palette4, #2D3748);background:var(--global-palette7, #eeeeee);}.wp-block-kadence-tabs .kt-tabs-id14017_e9e41d-62 > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title{margin-top:0px;margin-right:8px;margin-bottom:0px;margin-left:0px;}.wp-block-kadence-tabs .kt-tabs-id14017_e9e41d-62 > .kt-tabs-title-list li .kt-tab-title:hover, .wp-block-kadence-tabs .kt-tabs-id14017_e9e41d-62 > .kt-tabs-content-wrap > .kt-tabs-accordion-title .kt-tab-title:hover{border-color:var(--global-palette7, #eeeeee);color:var(--global-palette3, #1A202C);background:var(--global-palette8, #F7FAFC);}.wp-block-kadence-tabs .kt-tabs-id14017_e9e41d-62 > .kt-tabs-title-list li.kt-tab-title-active .kt-tab-title, .wp-block-kadence-tabs .kt-tabs-id14017_e9e41d-62 > .kt-tabs-content-wrap > .kt-tabs-accordion-title.kt-tab-title-active .kt-tab-title{border-color:var(--global-palette7, #eeeeee);color:#ffffff;background:#0a6689;}@media all and (max-width: 1024px){.kt-tabs-id14017_e9e41d-62 > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;}}@media all and (max-width: 767px){.kt-tabs-id14017_e9e41d-62 > .kt-tabs-content-wrap > .wp-block-kadence-tab{border-top:3px solid #0a6689;border-right:0px solid #0a6689;border-bottom:0px solid #0a6689;border-left:0px solid #0a6689;}}<\/style>\n<div class=\"wp-block-kadence-tabs alignnone\"><div class=\"kt-tabs-wrap kt-tabs-id14017_e9e41d-62 kt-tabs-has-9-tabs kt-active-tab-8 kt-tabs-layout-tabs kt-tabs-tablet-layout-inherit kt-tabs-mobile-layout-inherit kt-tab-alignment-left \"><ul class=\"kt-tabs-title-list\"><li id=\"tab-strongthefinancialconductauthorityfcastrong\" class=\"kt-title-item kt-title-item-1 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongthefinancialconductauthorityfcastrong\" data-tab=\"1\" class=\"kt-tab-title kt-tab-title-1 \"><span class=\"kt-title-text\"><strong>The Financial <abbr class='c2c-text-hover' title='to organise and perform a particular activity.'>Conduct<\/abbr> Authority (FCA)<\/strong><\/span><\/a><\/li><li id=\"tab-strongfcasupervisionoffirmsstrong\" class=\"kt-title-item kt-title-item-2 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongfcasupervisionoffirmsstrong\" data-tab=\"2\" class=\"kt-tab-title kt-tab-title-2 \"><span class=\"kt-title-text\"><strong>FCA: Supervision of firms<\/strong><\/span><\/a><\/li><li id=\"tab-strongfcasupervisionoffirmsprudentialsupervisionstrong\" class=\"kt-title-item kt-title-item-3 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongfcasupervisionoffirmsprudentialsupervisionstrong\" data-tab=\"3\" class=\"kt-tab-title kt-tab-title-3 \"><span class=\"kt-title-text\"><strong>FCA: Supervision of firms \u2013 Prudential Supervision<\/strong><\/span><\/a><\/li><li id=\"tab-strongfcaapproachesstrong\" class=\"kt-title-item kt-title-item-4 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongfcaapproachesstrong\" data-tab=\"4\" class=\"kt-tab-title kt-tab-title-4 \"><span class=\"kt-title-text\"><strong>FCA&#8217; Approaches<\/strong><\/span><\/a><\/li><li id=\"tab-strongoverviewofthefcamodelstrong\" class=\"kt-title-item kt-title-item-5 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongoverviewofthefcamodelstrong\" data-tab=\"5\" class=\"kt-tab-title kt-tab-title-5 \"><span class=\"kt-title-text\"><strong>Overview of the FCA model<\/strong><\/span><\/a><\/li><li id=\"tab-strongco-ordinationwiththeprastrong\" class=\"kt-title-item kt-title-item-6 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongco-ordinationwiththeprastrong\" data-tab=\"6\" class=\"kt-tab-title kt-tab-title-6 \"><span class=\"kt-title-text\"><strong>Co-ordination with the PRA<\/strong><\/span><\/a><\/li><li id=\"tab-strongfocusonretailconsumersstrong\" class=\"kt-title-item kt-title-item-7 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongfocusonretailconsumersstrong\" data-tab=\"7\" class=\"kt-tab-title kt-tab-title-7 \"><span class=\"kt-title-text\"><strong>Focus on retail consumers<\/strong><\/span><\/a><\/li><li id=\"tab-strongfcaexpectationtofirmsstrong\" class=\"kt-title-item kt-title-item-8 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-active\"><a href=\"#tab-strongfcaexpectationtofirmsstrong\" data-tab=\"8\" class=\"kt-tab-title kt-tab-title-8 \"><span class=\"kt-title-text\"><strong>FCA expectation to firms<\/strong><\/span><\/a><\/li><li id=\"tab-strongenhancedfocusonwholesalecommercialconductstrong\" class=\"kt-title-item kt-title-item-9 kt-tabs-svg-show-always kt-tabs-icon-side-right kt-tab-title-inactive\"><a href=\"#tab-strongenhancedfocusonwholesalecommercialconductstrong\" data-tab=\"9\" class=\"kt-tab-title kt-tab-title-9 \"><span class=\"kt-title-text\"><strong>Enhanced focus on Wholesale\/Commercial <abbr class='c2c-text-hover' title='to organise and perform a particular activity.'>Conduct<\/abbr><\/strong><\/span><\/a><\/li><\/ul><div class=\"kt-tabs-content-wrap\">\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-1 kt-inner-tab14017_7e3ffa-ec\"><div class=\"kt-tab-inner-content-inner\">\n<ul class=\"wp-block-list\">\n<li>Strategic objective\n<ul class=\"wp-block-list\">\n<li>ensuring the relevant markets function well<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Operational objectives\n<ul class=\"wp-block-list\">\n<li>promoting effective competition in the interests of consumers;<\/li>\n\n\n\n<li>securing an appropriate degree of protection for consumers; and<\/li>\n\n\n\n<li>protecting and enhancing the integrity of the UK financial system.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>FCA Statutory Objectives\n<ul class=\"wp-block-list\">\n<li>Securing an appropriate degree of protection for consumers<\/li>\n\n\n\n<li>Promoting effective competition in the interests of consumers:\n<ul class=\"wp-block-list\">\n<li>the needs of different consumers<\/li>\n\n\n\n<li>the ease with which consumers can change providers<\/li>\n\n\n\n<li>the ease of new entry<\/li>\n\n\n\n<li>how far the competition is encouraging innovation<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Protecting and enhancing the integrity of the UK financial system (including)<ul><li>soundness, stability and resilience<\/li><\/ul>\n<ul class=\"wp-block-list\">\n<li>orderly operation of markets<\/li>\n\n\n\n<li>financial crime<\/li>\n\n\n\n<li>market abuse<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>transparency of price formation<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-2 kt-inner-tab14017_fa6412-e4\"><div class=\"kt-tab-inner-content-inner\">\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Aim of Supervision\n<ul class=\"wp-block-list\">\n<li>To ensure firms have the interests of their customers and the integrity of the market at the heart of how they run their business.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>How will FCA do this?\n<ul class=\"wp-block-list\">\n<li>By influencing, persuading and, where appropriate, using formal powers to achieve a significant transformation in firms\u2019 <abbr class='c2c-text-hover' title='to organise and perform a particular activity.'>conduct<\/abbr> behaviours.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>For what population of firms?\n<ul class=\"wp-block-list\">\n<li>The FCA is responsible for the retail and wholesale <abbr class='c2c-text-hover' title='to organise and perform a particular activity.'>conduct<\/abbr> supervision of c.25,000 firms<\/li>\n\n\n\n<li>The FCA is also responsible for the prudential supervision of c.23,000 firms (i.e. those that are not prudentially regulated by the PRA).<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image size-large\"><img data-opt-id=1964118508  data-opt-src=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:1024\/h:104\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-12.png\"  loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"104\" src=\"data:image/svg+xml,%3Csvg%20viewBox%3D%220%200%201024%20104%22%20width%3D%221024%22%20height%3D%22104%22%20xmlns%3D%22http%3A%2F%2Fwww.w3.org%2F2000%2Fsvg%22%3E%3Crect%20width%3D%221024%22%20height%3D%22104%22%20fill%3D%22transparent%22%2F%3E%3C%2Fsvg%3E\" alt=\"\" class=\"wp-image-14109\" old-srcset=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:1024\/h:104\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-12.png 1024w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:300\/h:31\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-12.png 300w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:768\/h:78\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-12.png 768w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:360\/h:37\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-12.png 360w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:1375\/h:140\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-12.png 1375w\" \/><\/figure>\n\n\n\n<p><\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-3 kt-inner-tab14017_a9ef39-1d\"><div class=\"kt-tab-inner-content-inner\">\n<p>Although primarily a <abbr class='c2c-text-hover' title='to organise and perform a particular activity.'>conduct<\/abbr> regulator, the FCA is the sole regulator for firms not prudentially regulated by the PRA.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>The FCA&#8217;s<\/strong> <strong>Approach<\/strong><\/td><td><strong>Key Features<\/strong><\/td><\/tr><tr><td>\u2022Starting principle is that firms should be allowed to fail, therefore, the focus is on mitigating the impact on retail customers and market integrity of firms failing or under financial strain. <br>\u2022This approach is to ensure that any failure is orderly by ensuring that customers <abbr class='c2c-text-hover' title='Resources owned\/controlled by a business\/something valuable belonging to a person or organization that can be used for the payment of debts.'>assets<\/abbr> and money are protected. <br>\u2022Prudential supervision is graduated according to prudential significance. <br>\u2022On-going dialogue with PRA where we both have prudential responsibilities for a <strong>group<\/strong>. <\/td><td><strong>Prudential Classification <\/strong>\u2013 based on the impact that the disorderly failure of a firm could cause in terms of market disruption and market failure. <br><br><strong>Setting <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>Capital<\/abbr> &amp; Liquidity Financial Resource Requirements \u2013 <\/strong>assessing financial resources requirements for the most prudentially significant firms. <br><br><strong>Regulatory Return Monitoring \u2013 <\/strong>pro-actively reviewing returns for the most significant firms and acting on alerts for other firms.<br><br><strong>Thematic Work <\/strong>\u2013 cross-firm <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>capital<\/abbr> \/ liquidity work (including smaller firms)<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-4 kt-inner-tab14017_80c046-a5\"><div class=\"kt-tab-inner-content-inner\">\n<p><strong>The FCA aims to be a judgement based, forward-looking and pre-emptive regulator<\/strong><\/p>\n\n\n\n<p>The FCA\u2019s approach emphasises 5 elements:<\/p>\n\n\n\n<ul id=\"block-99a6b90a-fade-437a-976d-e48521d48c95\" class=\"wp-block-list\">\n<li>be forward-looking in the assessment of potential problems \u2013 looking at how we can tackle issues before they start to go wrong;<\/li>\n\n\n\n<li>intervene earlier when we see problems and before they cause consumer detriment or damage to market integrity;<\/li>\n\n\n\n<li>tackle underlying causes of problems, not just the symptoms, as this will be more effective and efficient in the long term for consumers and firms;<\/li>\n\n\n\n<li>secure <abbr class='c2c-text-hover' title='money or something else that someone receives because they have been injured or treated badly.'>redress<\/abbr> for consumers if failures do occur; and<\/li>\n\n\n\n<li>take meaningful action (credible deterrence) against firms that fail to meet our standards, including levels of fines that have a deterrent effect.<\/li>\n<\/ul>\n\n\n<div class=\"wp-block-ub-divider ub_divider ub-divider-orientation-horizontal\" id=\"ub_divider_3349e222-b83d-41f4-8906-363e878e4ef7\"><div class=\"ub_divider_wrapper\" style=\"position: relative; margin-bottom: 2px; width: 100%; height: 2px; \" data-divider-alignment=\"center\"><div class=\"ub_divider_line\" style=\"border-top: 2px solid #ccc; margin-top: 2px; \"><\/div><\/div><\/div>\n\n\n<p>To do this, in addition to the powers inherited from the FSA, they are able to:<\/p>\n\n\n\n<ul id=\"block-ff92c076-bfbd-4640-bdfc-888de49df339\" class=\"wp-block-list\">\n<li>Temporarily ban products or restrict sales for up to 12 months;<\/li>\n\n\n\n<li>Stop misleading financial advertising;<\/li>\n\n\n\n<li>Impose requirements on firms; and<\/li>\n\n\n\n<li>Subject to consultation, tell the market earlier about enforcement action.<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-5 kt-inner-tab14017_a64c09-2d\"><div class=\"kt-tab-inner-content-inner\">\n<figure class=\"wp-block-image size-large\"><img data-opt-id=1319384510  data-opt-src=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:1024\/h:498\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-13.png\"  loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"498\" src=\"data:image/svg+xml,%3Csvg%20viewBox%3D%220%200%201024%20498%22%20width%3D%221024%22%20height%3D%22498%22%20xmlns%3D%22http%3A%2F%2Fwww.w3.org%2F2000%2Fsvg%22%3E%3Crect%20width%3D%221024%22%20height%3D%22498%22%20fill%3D%22transparent%22%2F%3E%3C%2Fsvg%3E\" alt=\"\" class=\"wp-image-14114\" old-srcset=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:1024\/h:498\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-13.png 1024w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:300\/h:146\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-13.png 300w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:768\/h:374\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-13.png 768w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:360\/h:175\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-13.png 360w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:1087\/h:529\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-13.png 1087w\" \/><\/figure>\n\n\n<div class=\"wp-block-ub-divider ub_divider ub-divider-orientation-horizontal\" id=\"ub_divider_830a0c8c-94b4-46c8-a6ae-3890ad09cd5b\"><div class=\"ub_divider_wrapper\" style=\"position: relative; margin-bottom: 2px; width: 100%; height: 2px; \" data-divider-alignment=\"center\"><div class=\"ub_divider_line\" style=\"border-top: 2px solid #ccc; margin-top: 2px; \"><\/div><\/div><\/div>\n\n\n<p><strong>How will FCA achieve their objectives? <\/strong><\/p>\n\n\n\n<p>Firm Systematic Framework \u2013 Key judgements<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img data-opt-id=1725493253  data-opt-src=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:1024\/h:382\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-15.png\"  loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"382\" src=\"data:image/svg+xml,%3Csvg%20viewBox%3D%220%200%201024%20382%22%20width%3D%221024%22%20height%3D%22382%22%20xmlns%3D%22http%3A%2F%2Fwww.w3.org%2F2000%2Fsvg%22%3E%3Crect%20width%3D%221024%22%20height%3D%22382%22%20fill%3D%22transparent%22%2F%3E%3C%2Fsvg%3E\" alt=\"\" class=\"wp-image-14118\" old-srcset=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:1024\/h:382\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-15.png 1024w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:300\/h:112\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-15.png 300w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:768\/h:286\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-15.png 768w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:1536\/h:573\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-15.png 1536w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:360\/h:134\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-15.png 360w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:1920\/h:715\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2022\/10\/image-15.png 1929w\" \/><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-6 kt-inner-tab14017_86ccb7-f1\"><div class=\"kt-tab-inner-content-inner\">\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The FCA and PRA operate under different sets of objectives, although there is a Memorandum of Understanding in place between the two setting minimum co-ordination standards, including:\n<ul class=\"wp-block-list\">\n<li>Domestic supervisory colleges, with the frequency depending on the categorisation of the firm;<\/li>\n\n\n\n<li>Regular exchange of information, including material <abbr class='c2c-text-hover' title='to organise and perform a particular activity.'>conduct<\/abbr> risks, internal models, and <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>capital<\/abbr> and liquidity requirements (e.g. coverage of <abbr class='c2c-text-hover' title='to organise and perform a particular activity.'>conduct<\/abbr> risks in ORSA-Own Risk and Solvency Assessment);<\/li>\n\n\n\n<li>Notification of findings of Pillar 3 work\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.bis.org\/bcbs\/publ\/d455.pdf\" data-type=\"URL\" data-id=\"https:\/\/www.bis.org\/bcbs\/publ\/d455.pdf\">Pillar 3<\/a>&nbsp;<strong>requires firms to publicly disclose information relating to their risks, <abbr class='c2c-text-hover' title='is anything that increases one\u2019s ability to generate value. It can be used to increase value across a wide range of categories, such as financial, social, physical, intellectual, etc. In business and economics, the two most common types of capital are financial and human. Capital is the money used to build, run, or grow a business. It can also refer to the net worth (or book value) of a business. Capital most commonly refers to the money used by a business either to meet upcoming expenses, or to invest in new assets and projects.'>capital<\/abbr> adequacy, and policies for managing risk with the aim of promoting market discipline<\/strong>.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Consultation on <a href=\"https:\/\/www.fca.org.uk\/publication\/consultation\/cp15-25.pdf\" data-type=\"URL\" data-id=\"https:\/\/www.fca.org.uk\/publication\/consultation\/cp15-25.pdf\">SIF<\/a> (an FCA Significant Influence Function) applications;<\/li>\n\n\n\n<li>Expressing independent views on Part VII transfers; and<\/li>\n\n\n\n<li>Specific requirements for with-profit businesses.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>The supervisory teams will strive to coordinate where possible.<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-7 kt-inner-tab14017_e46952-85\"><div class=\"kt-tab-inner-content-inner\">\n<ul class=\"wp-block-list\">\n<li>The FCA\u2019s statutory objective is to secure an appropriate degree of protection for consumers.<\/li>\n\n\n\n<li>Customers do not always behave rationally and firms can exploit consumer biases. <\/li>\n\n\n\n<li>The FCA is using Behavioural Economics (eg. randomised control trials) to better understand these and inform our supervisory approach.<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-8 kt-inner-tab14017_82f775-6c\"><div class=\"kt-tab-inner-content-inner\">\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Evidence of how their consumers receive appropriate outcomes, throughout the product lifecycle<\/li>\n\n\n\n<li>Implement targets that are aligned with consumers&#8217; actual cover requirements<\/li>\n\n\n\n<li>Understand the difference between customers being satisfied and customers being treated fairly<\/li>\n\n\n\n<li>Identify, capture and mitigate the risks to their customers receiving inappropriate outcomes<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-tab kt-tab-inner-content kt-inner-tab-9 kt-inner-tab14017_d2d363-e1\"><div class=\"kt-tab-inner-content-inner\">\n<ul class=\"wp-block-list\">\n<li>The FCA\u2019s focus is to ensure the integrity and resilience of wholesale\/commercial insurance markets, rather than seeking to introduce concepts of detriment and <abbr class='c2c-text-hover' title='money or something else that someone receives because they have been injured or treated badly.'>redress<\/abbr> that we use in retail markets.<\/li>\n\n\n\n<li>Firms should recognise, however, that activities in retail and commercial markets are interconnected and that risks caused by poor <abbr class='c2c-text-hover' title='to organise and perform a particular activity.'>conduct<\/abbr> can be transmitted and undermine both markets.<\/li>\n\n\n\n<li>The FCA places more emphasis (and takes a more <abbr class='c2c-text-hover' title='is to have the ability to get your message across in a self-assured and confident way without being aggressive'>assertive<\/abbr> and interventionist approach) in particular on three areas:\n<ul class=\"wp-block-list\">\n<li>where commercial products filter down or are distributed to retail consumers;<\/li>\n\n\n\n<li>where certain behaviours in commercial markets can cause damage to market integrity; and<\/li>\n\n\n\n<li>where market structures can result in participants being disadvantaged or the market being inefficient.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/div><\/div>\n<\/div><\/div><\/div>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-pane kt-accordion-pane kt-accordion-pane-9 kt-pane14017_438bab-dc\"><div class=\"kt-accordion-header-wrap\"><button class=\"kt-blocks-accordion-header kt-acccordion-button-label-show\" type=\"button\"><span class=\"kt-blocks-accordion-title-wrap\"><span class=\"kt-blocks-accordion-title\"><strong>5.Menti Quiz<\/strong><\/span><\/span><span class=\"kt-blocks-accordion-icon-trigger\"><\/span><\/button><\/div><div class=\"kt-accordion-panel kt-accordion-panel-hidden\"><div class=\"kt-accordion-panel-inner\">\n<p><a href=\"https:\/\/www.menti.com\/alx16hbu1vht\">https:\/\/www.menti.com\/alx16hbu1vht<\/a><\/p>\n\n\n\n<figure class=\"wp-block-image size-full is-resized\"><img data-opt-id=263883455  data-opt-src=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:auto\/h:auto\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2024\/02\/image-2.png\"  loading=\"lazy\" decoding=\"async\" width=\"937\" height=\"937\" src=\"data:image/svg+xml,%3Csvg%20viewBox%3D%220%200%20100%%20100%%22%20width%3D%22100%%22%20height%3D%22100%%22%20xmlns%3D%22http%3A%2F%2Fwww.w3.org%2F2000%2Fsvg%22%3E%3Crect%20width%3D%22100%%22%20height%3D%22100%%22%20fill%3D%22transparent%22%2F%3E%3C%2Fsvg%3E\" alt=\"\" class=\"wp-image-27805\" style=\"width:409px;height:auto\" old-srcset=\"https:\/\/mlunj1lkadsx.i.optimole.com\/w:937\/h:937\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2024\/02\/image-2.png 937w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:300\/h:300\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2024\/02\/image-2.png 300w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:150\/h:150\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2024\/02\/image-2.png 150w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:768\/h:768\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2024\/02\/image-2.png 768w, https:\/\/mlunj1lkadsx.i.optimole.com\/w:270\/h:270\/q:mauto\/f:best\/https:\/\/thefinancialeducation.co.uk\/wp-content\/uploads\/2024\/02\/image-2.png 270w\" \/><\/figure>\n\n\n\n<p><\/p>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-kadence-pane kt-accordion-pane kt-accordion-pane-10 kt-pane14017_85f097-ef\"><div class=\"kt-accordion-header-wrap\"><button class=\"kt-blocks-accordion-header kt-acccordion-button-label-show\" type=\"button\"><span class=\"kt-blocks-accordion-title-wrap\"><span class=\"kt-blocks-accordion-title\"><strong>6. Q&amp;A &amp; End of session feedback<\/strong><\/span><\/span><span class=\"kt-blocks-accordion-icon-trigger\"><\/span><\/button><\/div><div class=\"kt-accordion-panel kt-accordion-panel-hidden\"><div class=\"kt-accordion-panel-inner\"><\/div><\/div><\/div>\n<\/div><\/div><\/div>\n\n\n\n<p><br><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Financial Markets &amp; Regulation: The Prudential Regulation Authority (PRA)&#8217;s Approach to Small Insurers<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"elementor_header_footer","format":"standard","meta":{"_eb_attr":"","_uag_custom_page_level_css":"","footnotes":""},"categories":[19],"tags":[],"table_tags":[],"class_list":["post-14017","post","type-post","status-publish","format-standard","hentry","category-405af"],"featured_image_src":null,"author_info":{"display_name":"admin","author_link":"https:\/\/thefinancialeducation.co.uk\/index.php\/author\/admin\/"},"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"education-hub-thumb":false},"uagb_author_info":{"display_name":"admin","author_link":"https:\/\/thefinancialeducation.co.uk\/index.php\/author\/admin\/"},"uagb_comment_info":1,"uagb_excerpt":"Financial Markets &amp; Regulation: The Prudential Regulation Authority (PRA)&#8217;s Approach to Small Insurers","_links":{"self":[{"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/14017","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/comments?post=14017"}],"version-history":[{"count":413,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/14017\/revisions"}],"predecessor-version":[{"id":37416,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/14017\/revisions\/37416"}],"wp:attachment":[{"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/media?parent=14017"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/categories?post=14017"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/tags?post=14017"},{"taxonomy":"table_tags","embeddable":true,"href":"https:\/\/thefinancialeducation.co.uk\/index.php\/wp-json\/wp\/v2\/table_tags?post=14017"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}