Insurance Jottings
Bank of England Tells Insurers, Banks to Continue Analyses of Impact of Climate Risk
The Bank of England (BoE) has told banks and insurers to press ahead with analysing the impact of climate change on their operations, saying that guidance published on the 29th June would be followed by targets next year.
The guide drawn up by the Climate Financial Risk Forum (CFRF), which was set up by the BoE and Britain’s Financial Conduct Authority last year, is the first of its kind and sets out how financial firms can analyse and disclose risks from climate change and spot opportunities for new consumer products.
Sarah Breeden, the BoE’s co-chair of the CFRF, said firms should start on their analyses straight away using the guide that is based on best practice from firms.
“It’s much easier said than done. It takes time to develop,” Ms Breeden told an online launch event for the guide.
The forum will reconvene next month to agree on strategy for next year.
“I expect this to include some sort of thematic work on data, on metrics and on targets,” Ms Breeden said.
The sector is already facing increased demands due to the COVID-19 pandemic and other challenges such as ending the use of the Libor interest rate benchmark.
Daniel Klier, global head of sustainable finance at HBSC bank, said “tone from the top” was key to success. “It will only happen if you hear it from your leaders,” he said.
Capital rules for insurers needed “a little bit of a nudge” to make it easier for them to invest in climate-friendly projects, added Nigel Wilson, chief executive of Legal & General Group.
Ms Breeden said that while guide did not have the force of mandatory rules, it does set out what the BoE expects from the firms it regulates.
ABI backs Treasury’s “long overdue” Solvency II review
The Association of British Insurers (ABI) has welcomed plans announced by the HM Treasury to review the Solvency II regime, noting that an overhaul of the directive for UK insurers is “long overdue”.
Marine market rates rise with Covid pushing cargo pricing
The marine insurance market continues to undergo an overhaul of its pricing, with cargo and hull and machinery business facing significant price corrections as underwriters respond to losses and repeated years of unprofitability, according to a new study.
UK, EU Likely to Miss Deadline for Accessing Financial Services After Brexit: Sources
Britain and the European Union are set to miss their end-June deadline for assessing future cross-border trade in financial services, leaving just six months before a potentially messy UK exit, financial industry and EU officials say.
Britain left the EU in January and complies with the bloc’s rules until the end of December in return for continued full access for financial firms.
Future direct EU access will depend on whether Brussels deems UK regulation to be “equivalent” to standards in the bloc. The EU and Britain agreed last year they would make “best endeavours” to complete the assessments by the 30th June.
“It’s a long, slow process and no one is rushing to finish them by the ‘official’ target date,” a senior official at an international bank said.
Britain has repeatedly said the assessments should be a formality, given that it has put all EU rules into UK law.
However, the EU’s assessments go beyond checking if Britain’s rules are currently equivalent, to asking whether the UK intends to diverge from EU norms in future, raising a major strategic issue, an official at a UK financial firm with EU operations said.
UK finance minister Rishi Sunak said on the 23rd June that comprehensive findings of equivalence were in the best interests of both parties, but also indicated there would be some changes to UK rulebooks, pleasing some Brexit backers who want to use Britain’s departure to change regulation.
Without equivalence, financial firms in Britain would be cut off from the EU market and have to open hubs in the bloc to continue serving customers there.
A European Commission official said the EU executive had sent questionnaires to British authorities covering 28 areas.
“The UK has not yet answered most of the questionnaires,” the commission official said.
“Assessments are also challenging because equivalence assessment will have to be forward-looking, taking account of overall developments, including any UK intention to
diverge from EU rules,” the commission official said.
“This is why we need clarity on how the relevant UK rules will evolve after the 1st January 2021.”
The EU has said it will only take a decision on actual access once it is fully satisfied with the assessments.
It mirrors the slowness of progress in separate UK-EU talks on a free trade agreement.
On the 23rd June Mr Sunak began setting out how Britain will regulate the financial sector beyond December, flagging that it wants to make changes to parts of insurance capital rules inherited from the bloc, which could make equivalence problematic, and amend consumer disclosure rules.
“We will analyse the UK’s texts and discuss them with the UK authorities in the overall context of our equivalence assessments,” the commission official said.
Britain’s finance ministry had no immediate comment.
Standard Club Press Article: Maritime Security in the wake of COVID-19
25 June 2020
With attention focused on Covid-19, it is easy to forget that there are many other issues which ship owners are facing, not least maritime security.
The spate of attacks and kidnappings off West Africa in the past few weeks alone should serve as a stark warning that while the world may be gripped by the worst global flu outbreak in a hundred years, the threat of piracy and armed robbery has not gone away.
The full article is available on the MRI website.
Britain to ‘tailor’ insurer capital requirements post-Brexit
Britain will look to “tailor” capital rules for UK insurers once the Brexit transition period ends in December and will seek to overhaul the Solvency II rules inherited from the European Union, Chancellor Rishi Sunak said on the 23rd June.
Spain and France argue on English court’s jurisdiction over Prestige oil spill P&I battle
Lawyers representing France and Spain have told a London court it does not have jurisdiction to hear cases accusing the European nations of violating an arbitration decision related to the MV Prestige oil spill which caused €1.5 billion (US$1.6 billion) of damage.