Insurance Law - ICOB - Are You Ready?

The Authorisation Requirement

As all "primary" insurance intermediaries and direct-selling insurers should be†aware, firms which wish to undertake regulated activities in respect of the sale†of general insurance after 14 January 2005 will need to be authorised by the†FSA to do so. The extent to which the "secondary market" is aware of this fact†and of its implications has a huge question mark against it - particularly given†the extremely broad interpretation of the law concerning the boundaries of†regulation which the FSA has adopted - but that is another story!

Regulated Activities

The regulated activities for which authorisation will be required include:

dealing in general insurance contracts as agent;

arranging (ie bringing about) deals in general insurance contracts;

making arrangements with a view to transactions in general insurance contracts;

assisting in the administration and performance of general insurance contracts;

advising on general insurance contracts;

agreeing to carry on any of the above activities.

High-Level And Prudential Rules

Any person who carries on any of these activities in the United Kingdom by†way of business after 14 January 2005 must either be exempt from the need for†authorisation (for example, if the firm is an "appointed representative" of an†authorised insurer or an authorised intermediary) or authorised by the FSA.†Authorised firms will be required to comply in full with the FSA's sourcebooks†concerning Principles for Businesses (PRIN), Senior Management†Arrangements, Systems and Controls (SYSC) and Threshold Conditions†(COND). Individuals within authorised firms performing "significant†influence functions" will need to be approved by the FSA as fit and proper to do†so and firms will therefore be subject also to the FSA's Statements of Principle†and Code of Practice for Approved Persons (APER) and Fit and Proper Test for†Approved Persons (FIT) sourcebooks. And authorised firms will be subject to†regulations concerning financial safeguards, including requirements to†maintain professional indemnity insurance and a prescribed minimum level of†financial resources and to be a member of the Financial Services Compensation†Scheme (rules providing for segregation of client money from monies belonging†to the firm or to insurers for which the firm acts will also apply, although for a†transitional 12 month period firms will be able to "co-mingle" insurers' money†and client money pending further review by the FSA...

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