MS10 Regulatory Minimum Standards

Transcription

1 MS10 Regulatory Minimum Standards Market Briefing 22 February 2016 Lloyd s 1

2 Agenda The Minimum Standards Self-Assessment Return MS10 Regulatory - a more detailed look at the subsets of this minimum standard Solvency II Mapping 2016 standards Annual Review March Attestation Lloyd s 2

3 Agenda The Minimum Standards Self-Assessment Return MS10 Regulatory - a more detailed look at the subsets of this minimum standard Solvency II Mapping 2016 standards Annual Review March Attestation Lloyd s 3

4 The Minimum Standards Originally developed around 2005 Refreshed in 2014 to incorporate the new SII Tests & Standards Effective January 2015 and annually reviewed Market Oversight is a key strategic priority and is supported by the Lloyd s minimum standards that all market participants are expected to achieve Lloyd s 4

5 The Minimum Standards MINIMUM STANDARDS CODE NAME Assessment Dates MS1.1 Underwriting Strategy and Planning Q MS1.2 Underwriting and Controls Q MS1.3 Delegated Authority Q MS1.4 Pricing and Rate Monitoring Q MS1.5 Exposure Management Q MS1.6 Reinsurance Q MS1.7 Underwriting Data Quality Q MS2 Claims Management Q MS3 Governance Q MS4 Risk Management Q MS5 Scope, Change and Use Q MS6 Modelling, Design and Implementation Q MS7 Validation Q MS8 Investment Management Q MS9 Reserving Q MS10 Regulatory Q MS11 Conduct Risk Q MS12 Operating at Lloyd s Q Lloyd s 5

6 Agenda The Minimum Standards Self-Assessment Return MS10 Regulatory - a more detailed look at the subsets of this minimum standard Solvency II Mapping 2016 standards Annual Review March Attestation Lloyd s 6

7 Purpose of Self- Assessments The objectives are to: Establish whether agents are by their own assessment meeting the standards, and to identify standards which they believe are not being met Ensure agents can provide a high level description of how they meet the standards and requirements Agree action plans to address any identified gaps or failings Reinforce that agents are required to carry out regular assessments of their compliance with the standards and the role of the Senior Nominated Person (SNP) Assist with annual sign off of Board Attestation Provide a baseline against which Lloyd s can test when carrying out further assurance activities It is not a review activity. Lloyd s will examine the responses but this will not include a test of the responses/evidence provided. Any follow up with agents to the responses provided will trigger specific review activity. Lloyd s 7

8 GOV GOV GOV REQUIREMENT NUMBER Information to be provided for each Requirement Describe how the Requirement is met Controls Evidence Self-assessment score GREEN (Currently Meets Minimum Standard) RED (Currently Not Meeting Minimum Standard) Action(s) planned Action(s) deadline(s) Lloyd's standards Self-Assessment template STANDARD GROUP STANDARD REQUIREMENT REGULATORY/LLOYD'S Description of how the Requirement is met Controls Evidence Self-Assessment Action(s) Planned Action(s) Deadline Notes Key: Rating [A = Article] [P = Paragraph] MS3 - Governance GOV Effective System of Governance The system of governance shall be proportionate to the nature, Level 1: Managing Agents shall have in place an effective scale and complexity of the operations of the business. A41 P1 system of governance which provides for sound A41 P2 and prudent management of the business. Level 2: A249 P1(a) Brief description of the current procedures/systems in place for this Requirement. List of controls currently in The evidence available to demonstrate GREEN (Currently Meets Description of the actions The month/year when the place to ensure the compliance. Minimum Standard), being taken to complete any Action(s) Planned will have all processes/systems described This can include policies/procedures and RED (Does not meet Minimum gap in compliance for this been completed and the operate effectively. operational evidence such as examples/files, Standard) Requirement. Requirement will be met. screen prints, system reports, Where RED is selected It should not be completed if audit/peer/review reports, and meeting Action(s) Planned and Actions Self Assessment is GREEN. minutes. Deadline must be completed. It must be completed if Self Evidence should not be submitted unless Assessment is RED. specifically requested. Where the evidence is a policy or procedure - the year it was last reviewed/updated must be provided. MS3 - Governance GOV Effective System of Governance The system of governance shall provide for effective Managing Agents shall have in place an effective cooperation, internal reporting and communication of system of governance which provides for sound information at all relevant levels of the business. and prudent management of the business. Level 1: A41 P1 A41 P2 Level 2: A249 P1(a) MS3 - Governance GOV Effective System of Governance The system of governance shall include compliance with the Level 1: Managing Agents shall have in place an effective requirements laid down in the SII Framework Directive, Articles A41 P1 system of governance which provides for sound 42 to 49. A41 P2 and prudent management of the business. Level 2: A249 P1(a) Lloyd s 8

9 Example Regulatory Requirement Managing agents shall commit to defending the Lloyd s brand against the misuse of Lloyd s name or misrepresented coverage, including by its agents, clients or other parties involved in the arranging of (re)insurances. What we wish not to see: Managing agents shall commit to defending the Lloyd s brand against the misuse of Lloyd s name or misrepresented coverage.. Describe how the requirement is met The Compliance Function works closely with the following to monitor misuse of the Lloyd's name or misrepresented coverage: - First line: UW, Claims and DAT - External: monthly Compliance Officers' Group (COG) and liaison with Lloyd's IRR for instances of fraud etc. List the controls List the evidence Rating Specify Actions Planned & Deadline Training Compliance Induction Policies and Procedures Financial Crime Response Plan Whistleblowing Policy Monthly Syndicate UW Boards We do. See Reg Lloyd s has not moaned at us. GREEN (currently meets) GREEN (currently meets) Lloyd s 9

10 What Managing Agents need to do Complete the template Check for gaps and inconsistencies Obtain sign-off by Senior Nominated Person and the Director responsible for Compliance or Risk Submit via SecureStore Provide updates regarding action(s) Lloyd s 10

11 What Lloyd s will do Review the Self Assessment Return Raise queries where the information needs clarification or resubmission (part or full) Discuss action(s) where they do not appear sufficient Track action(s) Assess what review work may be needed to test the Self Assessment information Identify where the returns indicate a general lack of understanding or compliance and what action may be needed and reissue guidance Issue additional guidance to the Market where appropriate Ensure the self-assessment tallies with our understanding of your SII development Overall findings reported to SAG Lloyd s 11

12 Experiences to date Agents must complete the self-assessment submission that will be posted on SecureStore after this presentation Two sign offs are required: They must be different! The first signatory is signing that they consider the return accurately reflects the agent s compliance with the minimum Standards i.e. having had a detailed level of review and challenge in the process. The second signatory needs to know that the governance and sign-off process has been appropriate and complete One of these signatories must be the SNP. We have returned the MS3 and MS9 submissions where they have not met these requirements Lloyd s 12

13 Agenda The Minimum Standards Self-Assessment Return MS10 Regulatory - a more detailed look at the subsets of this minimum standard Solvency II Mapping 2016 standards Annual Review March Attestation Lloyd s 13

14 Risk Objectives Developing, building and defending Lloyd s trading rights around the world Risk Areas Supervisory Environment Risk Regulatory and Compliance Risk Key Risk Outcomes Uncompetitive Trading Position Loss of Licence Regulatory Sanction Reputational Damage Risk Appetite No loss of trading rights, increase in capital or compliance* No mandated withdrawal of licence** No public regulatory sanction No damage to Reputation (including Illegal / ethical acts) * Or regulatory restriction, compared to main industry competitors ** We may relinquish licences where disproportionate regulatory burden Lloyd s 14

15 Joint Partnership on Regulatory And Compliance Risk Management Standards /Advice Front Line Prevent Prevent Targeted thematic audit/review* CORPORATION (London and Overseas) MARKET Transaction Post event assurance referrals Assurance processes for key risks Resolution /Mitigation Detect Back Stop Targeted syndicate follow-up * Where risk appetite threatened or where assurance through resolution/mitigation strategy deemed inadequate Lloyd s 15

16 16 Lloyd s 16

17 Thematic Reviews 2016 THREE YEAR PLAN (Q1) Completion of AML and sanctions screening tool review (Q3) Overseas service company financial crime controls - review of managing agent governance (Q1 start) Sanctions Market Review - all agents (2 year review utilising managing agents audit resource) Sanctions Market Review (continued) Lloyd s 17

18 Regulatory Minimum Standards Lloyd s 18

19 How do you maintain internal discipline on contact with regulators and know when to collaborate with Lloyd s? < Picture to go here > Lloyd s 19

20 How do you embed pre-bind licence checks and ensure escalation to the internal compliance function and where necessary to Lloyd s? < Picture to go here > How do you assess key risk areas? How do ensure the escalation of a potential regulatory breach? Lloyd s 20

21 How do you ensure that information is gathered consistently across your agency and particularly how do you manage data when it is being gathered, created or stored by third parties? < Picture to go here > How do you manage the ongoing control framework and how do you manage quality control and the escalation of information through the organisation? 21 Lloyd s 21

22 What controls do you have in place within your agency to ensure that you remain up-to-date with developments on financial crime and how do you ensure that new risk areas are understood? < Picture to go here > In the event of fraudulent misrepresentation of coverage, how do you demonstrate your active commitment to defending the Lloyd s name? 22 Lloyd s 22

23 Agenda The Minimum Standards Self-Assessment Return MS10 Regulatory - a more detailed look at the subsets of this minimum standard Solvency II Mapping 2016 standards Annual Review March Attestation Lloyd s 23

24 Solvency II Mapping In discussion with E&Y to update the original mapping from July 2014 launch Expect this to be permanent as the directive text is now formalised The current mapping covers the requirements for Internal Model approval so agents should consider the minimum standards as they are currently presented as sufficient for meeting Solvency II requirements We will include any revisions required to the standards in the Q3 Minimum Standards annual refresh. Lloyd s 24

25 Agenda The Minimum Standards Self-Assessment Return MS10 Regulatory - a more detailed look at the subsets of this minimum standard Solvency II Mapping 2016 standards Annual Review March Attestation Lloyd s 25

26 2016 Standards Annual Review Review of all standards and requirements to ensure they remain appropriate will take place Q2 In line with the Solvency II mapping exercise, any changes will issued in Q3 effective 1 January MS12 Operating at Lloyd s to include a new standard requiring Cyber Accreditation Currently being discussed through the LMA New Standard to be added through annual process Expectation that agent will have undertaken some cyber accreditation e.g. cyber essentials, cyber essentials plus during 2016 Lloyd s 26

27 Agenda The Minimum Standards Self-Assessment Return MS10 Regulatory - a more detailed look at the subsets of this minimum standard Solvency II Mapping 2016 standards Annual Review March Attestation Lloyd s 27

28 March Attestation Guidance issued 31 December Attestation schedules and explanation issued 1 st week of February showing Lloyd s view of your current compliance with the Minimum Standards. Agents can add their view of the rating before board sign-off. Where this is different to that issued by Lloyd s we expect a narrative to be included to explain why. Submission due Thursday 31 st March ed to risk.assurance@lloyds.com Lloyd s 28

29 What happens next? Slides will be made available on lloyds.com Quarterly model change report due 3 March MS10 Regulatory self-assessment due 31 March Next scheduled workshop/ briefings Pillar 3 19 th April Validation 18 th May MS6 kick off workshop [TBA] Contact risk.assurance@lloyds.com 29 Lloyd s 29

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