Insurance Briefing: Regulators Toughen Expectations On Financial Services Firms' Brexit Preparations

Welcome to Insurance Briefing - a fortnightly round-up of insurance legal and business developments with analysis and commentary from the insurance team at Pinsent Masons.

The six topics we're focusing on this week include:

Regulators toughen expectations on financial services firms' Brexit preparations

The European Insurance and Occupational Pensions Authority (EIOPA) has warned UK financial firms that they should not rely on leniency from local regulators in the EU if the UK exits the trading bloc without a deal on the cross-border provision of financial services provision in place. Tobin Ashby, a financial services expert at Pinsent Masons said that Bernardino's comments "reinforce what we are increasingly seeing from regulators – that they are looking for contingency plans to be implemented by financial services firms sooner rather than later. If insurers are not sufficiently prepared closer to Brexit, regulators will point to these statements and firms will not be able to argue that they were not aware of the issue. While there is still some hope for a political solution to the problem for cross-border financial services emerging from negotiations, firms need to be taking action to be ready for a range of outcomes if they are not doing so already," he said.

Pace of regulatory change an issue for 'nearly every' wholesale bank

Wholesale banks remain concerned about the pressures of complying with the "volume, pace and complexity" of new regulation, according to a survey of compliance officers. Nearly every respondent to a recent survey by the Financial Conduct Authority (FCA) ranked regulatory change as either the first or the second most significant challenge to their business. The second most commonly cited challenge was adequate staffing of the compliance function itself, with new regulation and new technology among the reasons given for the need for more compliance staff. The survey findings "confirm the position compliance officers have been telling us about", according to contentious regulatory expert Jonathan Cavill of Pinsent Masons. "Whilst such changes are arguably necessary to further the FCA's objective of protecting and enhancing the integrity of the UK financial system, the financial and operational pressures arising from these changes put firms and their compliance teams under significant strain," he said. "On top of this, there have also been an increasing number of enforcement actions by the FCA against compliance...