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There was one week in February which looked pretty daunting. EIOPA, our European regulator, was poised to publish more detail on its thoughts on members’ Brexit contingency plans while the FCA was poised to release its Wholesale Insurance Broker Market Study. Those are two of LIIBA’s three main priorities, both set for a major development within the same week. The potential impact on our community was seismic – and not necessarily in a good way.
Taking the FCA study first, it is worth remembering the process it went through. It was a study carried out under FCA’s powers as the competition regulator for Financial Services. It was a fact-finding mission – an opportunity for the FCA to better inform itself as to how our market works, not something triggered by any suspicious activity. The FCA creates what it calls ‘theories of harm’ – possible issues with the competitive nature of a market. It then uses the information gathered during the process to seek to disprove these theories. Slightly odd, but worth remembering when it comes to reviewing the output.
The FCA went through a series of information requests from our members. These were incredibly detailed, requiring such things as all financial and transactional detail for trades back over a five-year period. We reckon the FCA was furnished with comfortably in excess of 1 billion rows of data. It is quite something to sit in meetings between firms and their regulator when one of the main questions is how technically they want the data delivered to them since Excel only has the capacity to hold 10 million rows.
The FCA also wanted to speak to clients. We, via our partners in World Federation of Insurance Intermediaries, put them in touch with our sister associations around the globe – and, via them, with more international clients. Another vast pool of information for the team to analyse and interpret.
And so, to that Wednesday morning. Gathered at Casa LIIBA in time for the 7am release, we nervously hit the refresh button on the website. And there it was: FCA had found no evidence of anti-competitive practice. And what was being published was not, as expected, an interim report for discussion. It was the final report. Case closed – the first time FCA has ever moved straight to this stage.
Just a word on the wording. ‘Can find no evidence’ sounds a little mealy mouthed – reminiscent of the process by which Chicago police could ‘find no evidence’ that Al Capone was the head of a major crime syndicate and so had to prosecute him for tax evasion. But look back to that methodology. Evidence was what they had been looking for. They were disproving theories. Finding no evidence means what it means. The theory was just that. In reality, it was not happening.
But the report went further. It detailed the feedback that long client list had provided. Clients like being able to place their business in London where, they appreciate, they receive outstanding value and coverage they can’t get elsewhere. And, in particular, they value the service their broker delivers. LIIBA members providing huge expertise in the business the clients transact to help them assess their risk; and then knowledge of markets and approaches to structuring risk that ensures they buy the bespoke insurance they need.
The report came out about 19 hours after EIOPA published its recommendations around Brexit. In the main, these focussed on insurers and the issues of contract continuity. But recommendation nine spoke to the future of intermediation into third countries – which the UK will become as and when we leave the European Union.
Recommendation nine is a masterpiece of EU drafting. It rules nothing in; it rules nothing out; and everyone can feel like they have won. But that means we are still in the game. Already, discussions with EU regulators suggest that, at a minimum, a LIIBA member opening a subsidiary in the Union with a branch of that subsidiary in London to deliver services this end will provide a compliant route to continue to service European clients. More talks with EU regulators will take place.
And as we at LIIBA and our members individually enter these conversations, what an asset we now have. If an EU regulator wants to know why their consumers should still be able to buy insurance in London, they don’t need to take our word for it. We have a comprehensive, detailed, unprecedented report that validates the outstanding service London brokers deliver. In the end, all that endeavour and apprehension seems to have been worth it.
