UK watchdog warns insurers to clean up their act

UK insurance bosses risk losing their jobs if they fail to make adequate efforts to address bad behaviour, the regulator has warned in its latest move to press the industry to clean up its act.

In a letter to chief executives, the Financial Conduct Authority said it wanted to stamp out non-financial misconduct in the wholesale general insurance market, which covers the sort of specialist commercial insurance bought in and around Lloyd’s of London.

“A senior manager’s failure to take reasonable steps to address non-financial misconduct could lead us to determine that they are not fit and proper,” the letter said, which was signed by Jonathan Davidson, FCA executive director of supervision, retail and authorisations.

The fit and proper test is part of the Senior Managers and Certification Regime, which came into force for insurance companies in late 2018.

“As part of our approval of senior managers, an assessment of fitness and propriety will be completed,” the letter said. “This looks at factors including competence and capability, honesty, integrity and reputation, and we will consider any known relevant issues of non-financial misconduct.”

The City of London’s insurance market has been struggling to deal with growing accusations of bad behaviour.

A survey published by Lloyd’s of London in September found that almost 500 people had witnessed sexual harassment over the past year, while less than half of the people who raised a concern felt they had been taken seriously.

Lloyd’s chief executive John Neal said at the time that the findings were “extremely troubling” and launched a series of measures to tackle the problems. They included a new set of standards for businesses and individuals, and a new advisory group.

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In November the Prudential Regulation Authority, the FCA’s sister regulator, warned insurance bosses to clean up their industry. It said instances of reported abuse were of “deep concern”.

The PRA last month put Lloyd’s itself under enhanced scrutiny after it emerged that the market had failed to maintain its whistleblowing systems. A helpline that allowed staff to report concerns anonymously had been allowed to lapse for 16 months.

The latest FCA letter told chief executives: “We expect you to identify what drives this behaviour and, where appropriate, modify those drivers to shape proper conduct.”

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