CII IF2 cheat sheet

The Financial Services and Markets Act 2000 (FSMA) is the primary statute; the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) are the regulators. The PRA regulates prudential soundness of insurers; the FCA regulates conduct and market behaviour.

FCA Handbook modules relevant to insurance: PRIN (Principles for Businesses), ICOBS (Insurance: Conduct of Business sourcebook), SYSC (Senior Management Arrangements, Systems and Controls), and COMP (Compensation).

The FCA's statutory objectives: consumer protection, integrity of the UK financial system, and promoting effective competition in the interests of consumers. The PRA's objectives: general safety and soundness and, for insurers, policyholder protection.

Threshold Conditions (COND) must be met at authorisation and on an ongoing basis; they include legal status, location of offices, effective supervision, appropriate resources, suitability, and business model.

The Senior Managers and Certification Regime (SM&CR) applies to insurers: Senior Managers hold prescribed responsibilities and have Statements of Responsibilities; Certification staff are assessed annually as fit and proper.

The Insurance Distribution Directive (IDD) was transposed via the FCA's IDD rules; it covers conduct standards, product oversight and governance (POG), demands-and-needs, and professional requirements for distributors.

Solvency II (retained in UK law as the UK Solvency II regime) sets capital requirements: Solvency Capital Requirement (SCR) and Minimum Capital Requirement (MCR), plus two capital tiers and the risk margin.

The Financial Ombudsman Service (FOS) can award compensation; the Financial Services Compensation Scheme (FSCS) protects policyholders if an insurer fails, with coverage limits that vary by type of insurance (e.g., 100% for compulsory insurance).

Consumer protection legislation relevant to insurance includes the Consumer Rights Act 2015 (fairness of terms, transparency) and the Consumer Protection from Unfair Trading Regulations 2008 (prohibiting misleading actions and omissions).

An insurance contract requires offer, acceptance, consideration (the premium), intention to create legal relations, and capacity. Insurable interest is also required at inception for certain classes (e.g., life) under the Life Assurance Act 1774.

Utmost good faith (uberrimae fidei) historically applied to insurance contracts; the Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA) replaced the duty to volunteer information for consumers with a duty to take reasonable care not to make a misrepresentation.

For non-consumer (commercial) insureds, the Insurance Act 2015 introduced the duty of fair presentation: disclose every material circumstance the insured knows or ought to know, or give sufficient information to put the insurer on notice.

Remedies for breach of the duty of fair presentation under the Insurance Act 2015 are proportionate: if the breach was deliberate or reckless, the insurer may avoid the contract and retain premiums; otherwise remedies depend on what the insurer would have done.

Under CIDRA, remedies for qualifying misrepresentation by a consumer depend on the type of misrepresentation (deliberate/reckless, careless, or innocent) and what the insurer would have done: avoid the contract, apply terms, or reduce the claim proportionately.

A warranty is a term of the contract; under the Insurance Act 2015, breach of warranty suspends cover rather than automatically discharging the insurer, and the suspension ends when the breach is remedied.

The principle of indemnity means the insured is restored to the financial position before the loss, subject to the sum insured and policy limits; valued policies and reinstatement cover are exceptions.

Subrogation allows the insurer, after paying a claim, to step into the insured's shoes and pursue third parties; the insured must not prejudice the insurer's subrogation rights.

Contribution applies where multiple insurers cover the same risk: each pays a rateable proportion, preventing double recovery. The doctrine of proximate cause determines which peril caused the loss when several perils operate.

The FCA's Principles for Businesses (PRIN) are high-level, ever-applicable rules: integrity, skill care and diligence, management and control, financial prudence, market conduct, customers' interests, communications with clients, conflicts of interest, customers: relationships of trust, and clients' assets.

ICOBS sets out conduct rules for insurance distribution: fair treatment of customers, clear information, demands-and-needs assessment, product disclosure, and claims handling.

The FCA's Treating Customers Fairly (TCF) outcomes are embedded in PRIN and ICOBS; firms must demonstrate fair treatment across the product lifecycle, including product design, marketing, advice, and claims.

Product oversight and governance (POG) requires manufacturers to identify target markets, test products, and monitor outcomes; distributors must understand products and ensure they meet customer needs.

The IDD requires disclosure of the firm's status (insurer, intermediary, or appointed representative), the nature of remuneration, and complaints handling procedures before the contract is concluded.

Financial promotions must be fair, clear, and not misleading (s.21 FSMA); the FCA's rules on financial promotions apply to insurance products, including social media and digital channels.

The FCA's Consumer Duty (effective 2023) requires firms to act to deliver good outcomes for retail customers across four outcomes: products and services, price and value, consumer understanding, and consumer support.

Complaints must be handled under the FCA's DISP rules: acknowledge promptly, resolve within eight weeks, and inform the customer of the right to refer to the Financial Ombudsman Service if unresolved.

Vulnerability: firms must identify and respond to customers in vulnerable circumstances, including those with health conditions, low financial resilience, or life events, and adapt communications and processes accordingly.

Data protection: the UK GDPR and Data Protection Act 2018 apply to insurance; lawful basis, transparency, data minimisation, and security are required. Special category data (health) needs additional conditions.

Money laundering: the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) require customer due diligence, risk assessment, and suspicious activity reporting to the NCA.

Bribery: the Bribery Act 2010 creates offences including failure of a commercial organisation to prevent bribery; adequate procedures are a defence. Gifts and hospitality must be controlled.

Sanctions: insurers must screen customers and beneficiaries against UK sanctions lists and comply with Office of Financial Sanctions Implementation (OFSI) requirements; strict liability applies to dealing with designated persons.

Whistleblowing: the Public Interest Disclosure Act 1998 protects workers who make protected disclosures; firms must have internal whistleblowing arrangements and inform the FCA of certain matters.

Complaints and redress: the Financial Ombudsman Service can make awards; firms must cooperate with the FOS and comply with its decisions. FOS awards are binding on the firm if accepted by the complainant.

Record keeping: FCA rules require firms to retain records (e.g., SYSC 9) for specified periods; for insurance distribution, records of advice and transactions must be kept, often for at least five years.

Outsourcing and third-party risk: SYSC 8 requires firms to manage outsourcing risks, including due diligence, contractual terms, and exit plans; the firm remains responsible for regulatory compliance.

Financial crime: firms must have systems and controls (SYSC 6.1) to counter financial crime, including fraud, and report suspicions; the FCA expects a risk-based approach and senior management accountability.