Investor Presentaiton
Slide 18: Risk Categories
When we do engage with you we will come on site and look at ten different risk categories.
The quick thinking of you will realise there are eleven risk categories on the screen (the
eleventh, Financial Crime Risk, will be the subject of a separate cycle of visits from our
Financial Crime team).
From these periodic engagement tasks, we will be able to form a view as to the level of risk in
a particular area and we may require a firm to reduce that specific risk via a Risk Mitigation
Plan.
Finally, the conclusions reached by supervisors are now subject to internal challenge at cross-
Commission Risk Governance Panels, in order to ensure that the conclusions reached and any
outcomes are consistent and proportionate. In 2014 the Insurance team will present at 7 Risk
Governance Panels of which 5 have already been held and we will be holding a further 6 Risk
Governance Panels in 2015.
Slide 19: Other Risk Matters
Having returned to Insurance I have witnessed, with concern, some areas of risk that although
mentioned by Caroline last year are worth repeating plus some new observations of my own.
On average the Insurance team is dealing with ten applications per month.
The level of due diligence, that accompanies applications, undertaken by Insurance Managers
is sometimes inadequate and unacceptable. Yes the Commission has access to information not
available to Managers but simple internet searches often identify issues which the Manager
should have been fully aware of. In addition PQs are not checked to ensure they contain all
pertinent information or that they have been signed!
Sense checks of business plans and projections should often identify issues which the
Commission is picking up and which therefore delay processing of the application. Examples
are the business plan stating that the programme will be fully reinsured but the projections do
not show any reinsurance. Claims are estimated, in the business plan, to take eighteen months
to settle and yet projections and cash flows show settlement of claims immediately and no
claims reserves in the balance sheet.
We have recently had a PQ which failed to disclose information about former convictions
easily sourced on google. We even had an applicant who had been economical with the truth as
to why his previous insurance company in another jurisdiction had been placed into
liquidation. On checking with that jurisdictions regulatory authority it transpired that the
regulator had placed the company into compulsory liquidation due to breaches of the insurance
law.
Undertaking such due diligence takes valuable resource away from supervising insurers.
It is not uncommon to receive an application and a request that it be dealt with as soon as
possible as the Manager has promised a turnaround within two weeks. Our Service level
Standard is to give in principle approval 28 calendar days after receipt of an application and we
regularly beat that standard.
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