CII IF2 flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

FSMA 2000

The Financial Services and Markets Act 2000 is the UK statute establishing the regulatory framework, creating the FCA and PRA, and providing the legal basis for the FCA Handbook and authorisation.

FCA statutory objectives

The FCA has three operational objectives: securing an appropriate degree of protection for consumers, protecting and enhancing the integrity of the UK financial system, and promoting effective competition in the interests of consumers.

PRA objectives

The Prudential Regulation Authority has two objectives: promoting the safety and soundness of PRA-authorised firms, and, for insurers, securing an appropriate degree of protection for policyholders.

Threshold Conditions

The minimum conditions firms must satisfy and continue to satisfy to be authorised, covering legal status, location of offices, effective supervision, appropriate resources, suitability, and business model.

SM&CR

The Senior Managers and Certification Regime requires senior managers to hold prescribed responsibilities, be approved by the regulator, and for certification staff to be assessed annually as fit and proper.

Insurance Distribution Directive

The IDD sets EU-wide conduct standards for insurance distributors, including demands-and-needs, product oversight and governance, professional requirements, and disclosure, transposed into FCA rules.

Solvency II

The prudential regime for insurers specifying capital requirements (SCR and MCR), governance, risk management, and reporting, designed to ensure policyholder protection and financial stability.

Financial Ombudsman Service

The statutory dispute-resolution scheme for financial services, including insurance, which can award compensation and whose decisions are binding on the firm if accepted by the complainant.

Insurable interest

A legal requirement that the insured has a financial or legal interest in the subject matter of insurance, preventing wagering contracts; required at inception for life insurance under the Life Assurance Act 1774.

Utmost good faith

The historical duty of honesty and disclosure in insurance contracts, now modified for consumers by CIDRA and for commercial insureds by the Insurance Act 2015 duty of fair presentation.

CIDRA 2012

The Consumer Insurance (Disclosure and Representations) Act 2012 replaced the consumer's duty to volunteer information with a duty to take reasonable care not to make a misrepresentation.

Duty of fair presentation

Under the Insurance Act 2015, commercial insureds must disclose every material circumstance they know or ought to know, or give sufficient information to put the insurer on notice.

Proportionate remedies

Under the Insurance Act 2015, remedies for breach of the duty of fair presentation depend on the insurer's response: avoid and retain premium if deliberate or reckless; otherwise proportionate remedies.

Warranty

A contractual term in insurance; under the Insurance Act 2015, breach suspends cover rather than discharging the insurer, and suspension ends when the breach is remedied.

Indemnity principle

The principle that insurance restores the insured to the financial position before the loss, subject to policy limits; valued policies and reinstatement are exceptions.

Subrogation

The insurer's right, after paying a claim, to step into the insured's shoes and pursue third parties responsible for the loss, preventing double recovery by the insured.

Contribution

The principle that where multiple insurers cover the same risk, each pays a rateable proportion, preventing the insured from recovering more than the loss.

Proximate cause

The dominant, effective cause of a loss; used to determine whether a peril is covered when multiple causes operate, applying the policy wording and exclusions.

FCA Principles for Businesses

High-level, ever-applicable rules in PRIN covering integrity, skill and care, management and control, financial prudence, market conduct, customers' interests, communications, conflicts, and client assets.

ICOBS

The FCA's Insurance: Conduct of Business sourcebook, setting rules on fair treatment, disclosure, demands-and-needs, product information, and claims handling for insurance distribution.

Treating Customers Fairly

The FCA's principle that firms must deliver fair outcomes for customers across the product lifecycle, embedded in PRIN and ICOBS and evidenced through management information.

Product oversight and governance

Rules requiring insurance product manufacturers to identify target markets, test products, and monitor outcomes, and distributors to understand products and meet customer needs.

Financial promotions

Communications inviting or inducing investment or insurance business must be fair, clear, and not misleading under s.21 FSMA and FCA rules, including digital and social media.

Consumer Duty

The FCA's rule requiring firms to act to deliver good outcomes for retail customers across products and services, price and value, consumer understanding, and consumer support.

Complaints handling (DISP)

FCA rules requiring firms to acknowledge complaints promptly, resolve within eight weeks, and inform customers of the right to refer unresolved complaints to the Financial Ombudsman Service.

Vulnerable customers

Customers with characteristics such as health conditions, low financial resilience, or life events that increase harm risk; firms must adapt communications and processes to ensure fair treatment.

UK GDPR

The UK data protection regime (with the Data Protection Act 2018) requiring lawful basis, transparency, minimisation, and security; health data is special category data needing extra conditions.

Money laundering regulations

The MLRs 2017 require insurers to conduct customer due diligence, risk assessments, and report suspicious activity to the National Crime Agency, with senior management responsibility.

Bribery Act 2010

Creates offences including bribing and being bribed, and the corporate offence of failing to prevent bribery; adequate procedures are a defence. Gifts and hospitality must be controlled.

Sanctions compliance

Insurers must screen customers and beneficiaries against UK sanctions lists and comply with OFSI requirements; strict liability applies to dealing with designated persons.

Whistleblowing

The Public Interest Disclosure Act 1998 protects workers making protected disclosures; firms must have internal arrangements and report certain matters to the FCA.

Record keeping

FCA rules (e.g., SYSC 9) require firms to retain records for specified periods; insurance distribution records of advice and transactions are typically kept for at least five years.