Chapter 1

Question 1

What are the name of the 3 bodies made after financial crisis by Financial Services Act 2012

Answer 1

1. FCA
2. PRA
3. FPC

Question 2

FCA

Answer 2

Conduct of business for all financial firms including intermediaries

Question 3

FCA’s Objectives

Answer 3

• Ensure relevant markets function well
• Consumer protection
• Integrity
• Competition

Question 4

What other bodies does the FCA oversee

Answer 4

• Financial Ombudsman Service (FOS)
• Money Advice Service (MAS)
• Financial Service Compensation Scheme (FSCS)

Question 5

How pillars in FCA’s approach

Answer 5

1. Firm systematic Framework
2. Conducting event driven work for emerging issues
3. Reviewing issues as they happen (products and promotions can be banned by FCA)

RISK BASED APPROACH

Question 6

PRA objective

Answer 6

Within BOE

Promote safety and soundness of PRA-regulated persons

Firms must meet threshold conditions

Question 7

What PRA’s threshold conditions for firms to carry out regulated activity

Answer 7

1. Head office in UK
2. Conduct business in prudent manner
3. Adequate resources
4. Fit and proper
5. Appropriately staffed

Question 8

PRA

Answer 8

Supervisory framework to see gross risk exposure , what is in place to mitigate

Question 9

PRA: Judgement based approach

Answer 9

• Forward looking
• Not only insurance firms
• Approach differs for each industry

Question 10

Insurance Regulators

Answer 10

Dual regulated: PRA + FCA

Question 11

PRA in Insurance

Answer 11

Focuses on outcomes and adequate measures

• mgmt and governance
• culture and competence (Board takes responsibility)
• Risk mgmt and controls
• Financial resources
• Resolvability

Question 12

FPC

Answer 12

Emerging and systemic risk

• provide strategic direction to the regulatory set up

Question 13

How do PRA + FCA impact UW functions (5)

Answer 13

1. Principles of business (PRIN)
2. Training and competence (TC)
   3.Fair treatment of customers
3. Monitoring and auditing
4. Complaint and dispute resolution

Question 14

FCA Handbook (PRIN) 11 principles

Answer 14

1. Integrity
2. Skill, care and diligence
3. mgmt and control
   4.financial prudence
4. market conduct
5. customers interest
6. Comms with client
7. conflict of interest
8. customers - relationship of trust
9. client’s assets
10. relationship with regs

Question 15

PRA threshold categories

Answer 15

Cat 1 - 5
1 = significant capacity to cause disruption to large number of policyholders

2 = significant

3 = minor

4 = very little

5 = almost no

Question 16

PRA solvency requirements

Answer 16

In line with Solvency II which came out Jan 2016

Question 17

Solvency II objectives (4)

Answer 17

1. Greater risk awareness
2. Deeper integration of EU insurance market
3. Policy protection
4. Competitiveness

Question 18

FCA supervision model

Answer 18

Firm Systemic Framework: structured conduct assessments

Event drive work: Faster and more decisively w/ problems

Question 19

PRIN 2: Includes training and competence sourcebook

Answer 19

• employees are competent
  -remain competent for the work they do
  -appropriately supervised
• competence regularly reviewed
• competence appropriate to nature of work

Question 20

What principle in training and competence

Answer 20

PRIN 2 - Due skill, care and due diligence

Question 21

What principle is fair treatment of customers

Answer 21

PRIN 6 - pay due regard to the interest of its customers and treat them fairly

Question 22

What are the 6 outcomes

Answer 22

1. Fair treatment of customers is central to the corp culture
2. Products / services designed to meet needs of identified consumer groups
3. Clear info - before, during and after sale
4. Suitable advice given
5. Products do what they are said to be done
6. No un-reasonable post sale barriers inforced to change, switch provider etc

Question 23

Dispute resolution: Complaints (DISP)

Answer 23

Section in FCA handbook = expression of dissatisfaction should be treated as complaint

Must be recorded, analysed and used for where improvements can be made

Question 24

Consumer duty - FCA

Answer 24

For all new / existing products and services by end of July 2023 -> Firm must deliver good outcomes for retail consumers

Question 25

Monitoring and auditing business

Answer 25

PRIN 2 & 3

Question 26

UW monitoring

Answer 26

- detailed budgets aligned with org corp objectives - Authority limits - Claims freq and severity - Premium comparison - Sales and renewal volumes

Question 27

FSCS

Answer 27

- Established under s.212 of FSMA 2000 100% protection for: - compulsory insurance - PI - Long term (pensions, life insurance) - Certain claims for injury, sickness or infirmity of ph 90% protection of claim with no upper limit for other types of policy 0% protection for directors, managers of defaulting firm

Question 28

FOS

Answer 28

- Free indpt impartial service deals with individual consumers / small businesses and FI's - Membership is compulsory for all firms including intermediaries

Question 29

Eligible FOS

Answer 29

- Consumer - Micro-enterprise (<10 employees, turnover

Question 30

When can they refer complaint to FOS from

Answer 30

6 months of the date on firm's letter advising claimant of its final decision regarding complaint 6 years after the event complained about 3 years after complainant knew or should've known they had cause for complaint

Question 31

Maximum FOS awards

Answer 31

£375k about acts after 1st Apr 19 £170k about acts before 1st Apr 19

Question 32

Directions award FOS

Answer 32

Telling firm what actions that need to done to put things right

Question 33

How is FOS funded

Answer 33

- Levy paid by all firms - Case fee payable by firm to which complaint relates to