CP23/18: Quarterly Consultation Paper No. 41

The Financial Conduct Authority, FCA, has published a new quarterly consultation paper (CP23/18) in which it seeks minor changes to the FCA Handbook intended to remove inconsistencies and provide clarity in relation to employers‘ liability insurance and professional indemnity insurance (PII) for authorized firms. The changes would result in amendments of the Insurance Conduct of Business sourcebook (ICOBS) and the FCA’s Supervision manual (SUP) and are briefly described below.
(1) Changes to employers‘ liability insurance rules:
In 2011, rules were introduced requiring employers‘ liability insurers to publish an employers‘ liability register that includes the insured firm’s employer reference number (ERN). The register helps individuals who want to bring claims against their employers, especially when the employers no longer exist or cannot be located. The Employer’s Liability Tracing Office (ELTO), an industry-led office, manages this register and has requested updates to simplify the ERN matching process. Thereafter, ELTO has found better success in obtaining accurate ERNs from HM Revenue & Customs (HMRC) compared to insurance firms themselves.
The FCA now suggests that insurers no longer need to obtain and provide ERNs to a tracing office if certain conditions are met. Furthermore, the FCA proposes to implement a 28-business-day window for the tracing office to obtain ERNs from HMRC, after which insurers will have to assist in obtaining the outstanding ERNs.
(2) PII Requirements for Authorized Firms:
The FCA has found an inconsistency between the Prudential sourcebook for Mortgage and Home Finance Firms (MIPRU) and the FCA’s Supervision manual (SUP) regarding PII requirements for authorized firms with appointed representatives (ARs) who carry out specific activities. The proposal aims to clarify that it is the principal firm’s responsibility to obtain and maintain continuous PII cover for the activities for which it may be liable due to its ARs‘ conduct´. The FCA would thereby add new guidance under SUP 12.4.10AR(2). In turn, SUP 12.4.10AR(1) suggesting that ARs can obtain their own PII cover will be deleted.