We were delighted to co-sponsor an inaugural seminar focussed on the challenges and risks surrounding delegated underwriting and outsourcing arrangements. The event, held at the NED earlier last week, was attended by senior market practitioners responsible for risk and governance in both Lloyd’s and Company Market providers.
Event speakers David Goodley (Principal Consultant at City-Compliance) and Tom Hamill (Manager, Claims and Delegated Authority Operations at LMA) revisited the FCA’s 2015 thematic review which focussed on concerns over firms’ oversight of outsourced arrangements in delegated underwriting.
Whilst the principles of the review have not changed it was clear that the market has reacted in different ways, and to different degrees. With no subsequent guidance or comment from the FCA, various approaches to address the review have been initiated. These differ from firm to firm, as well as in the Lloyd’s and non-Lloyd’s environments. Mr Hamill explained how the LM TOM project is progressing to implement Data Standards with modernisation and consistency, and how Chorus (to replace Atlas) is in development and test phase.
Mr Goodley explained the vast range of data that needs to be considered in assessing the risks associated with an outsourcing contract, which extend far beyond underwriting performance and include claims declinature rates, complaints and suitability of individuals to both transfer and accept responsibilities.
The seminar then heard from Alex Booth (partner at law firm Elborne Mitchell) who reminded the group that a firm delegating authority cannot contract out of its regulatory obligations and must take reasonable care to supervise outsourced arrangements.
Miss Booth went on to focus on the responsibilities and accountability of individuals involved in delegated underwriting that come about through the Senior Managers & Certification Regime (SM&CR). Those identified as senior managers must now have a statement of responsibility and this must be kept up to date.
Firms must be able to explain clearly how responsibility for all outsourced functions is allocated among its senior managers. Prescribed responsibilities in delegated underwriting are wide ranging and include audit oversight, policies and procedures to counter the risks of financial crime, integrity of financial and regulatory reporting and outsourced operational functions, including systems and technology.
The final speaker, founder and CEO of REG (UK) Ltd, Michael Phair, provided an insight as to how RegTech (Regulatory Technology) solutions can be utilised to aggregate, process and analyse data from numerous disparate sources, including market wide repositories, proprietary and legacy systems as well as public and private market suppliers. As the London market continues to thrust ahead with its modernisation plans and firms continue to struggle managing legacy systems, REG has responded with an ‘out of the box’ solution to enable underwriting businesses to capture and monitor fragmented information in one, simple to use management and reporting tool.
Globally, the amount of data generated from an increasing number of sources grows exponentially. 90% of the data ever created was generated in the last 24 months!
It seems the world of delegated underwriting is operating in a parallel dynamic. RegTech solutions are evolving rapidly in response, enabling firms to instantly access and assess their data, spending less time on compilation and cleansing and more time using that data to drive effective business decision making around risk, compliance, governance, productivity and growth.
Co-Sponsors REG (UK) Limited and Elborne Mitchell LLP would like to thank seminar delegates for their involvement and the NED for providing excellent facilities.