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LM1 > Chapter 6 Legal and regulatory enivronment > Flashcards

Chapter 6 Legal and regulatory enivronment Flashcards

1
Q

Which regulator is the prime regulator for insurers

A

Prudential Regulation Authority

PRA

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2
Q

Which regulator regulates insurance intermediaries

A

Prudential Regulation Authority

PRA

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3
Q

What are the PRA’s objectives

A

promote safety and soundness of UK financial system

contribute to ensuring the insurance policyholders PRA’s

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4
Q

Who is the lead regulator of the Lloyd’s of London

A

PRA

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5
Q

Who regulates managing agents

A

PRA and FCA

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6
Q

Who regulates Lloyd’s brokers and members agents

A

FCA

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7
Q

What is the FCA’s strategic objective?

A

To protect and enhance confidence in

the U.K. financial system.

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8
Q

What are the FCA’s three operational objectives

A

Consumer protection
Integrity
Competition

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9
Q

What are the three elements of the FCA’s risk framework?

A

Firm systematic framework
Event driven work
Issues and products

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10
Q

Identify three areas where the FCA focus on:

A

Product governance
End-to-sales processes
Prevention of financial crime

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11
Q

Which Act encourages “whistle blowing” by reducing employers ability to punish whistle blowers?

A

Public Interest Disclosure Act 1998 (PDA)

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12
Q

What are Threshold Conditions?

A

The conditions a firm needs to meet to be authorised by PRA/FCA

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13
Q

What are the three pillars in Solvency II

A

Pillar 1 Capital requirements
Pillar II Risk management
Pillar III Disclosure

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14
Q

What will be higher MCR or SCR?

A

SCR

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15
Q

What does ORSA stand for under what pillar of Solvency II is it required?

A

Own Risk and Solvency Assessment PIllar 2

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16
Q

Identify two reports insurers are required to provide under Solvency II Pillar 3 Disclosure which is public and which private?

A

Solvency Financial Condition Report (SCR) Public

Regulatory Supervisory Report (RSR) Private

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17
Q

Identify seven ways te PRA can intervene if an insurance company’s capital is inadequate for the risks they face.

A 
Restrict premium income
Require more frequent accounts
Require more information
Prevent insurer accepting new business
Require company to restore capital
Impose requiremenst on investment policy
Withdraw authorisation
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18
Q

Identify seven items in an insurance broker’s Retail Mediation Activities Return

A 
Accounting information
Regulatory capital
PI insurance
Threshold conditions
Training and competence
Conduct of business data
Product sales data
FCA fees data
Complaints (Eligible complaints to be reported twice yearly)
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19
Q

Which regulator is the prime regulator for insurers

A

Prudential Regulation Authority

PRA

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20
Q

Which regulator regulates insurance intermediaries

A

Prudential Regulation Authority

PRA

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21
Q

What are the PRA’s objectives

A

promote safety and soundness of UK financial system

contribute to ensuring the insurance policyholders PRA’s

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22
Q

Who is the lead regulator of the Lloyd’s of London

A

PRA

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23
Q

Who regulates managing agents

A

PRA and FCA

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24
Q

Who regulates Lloyd’s brokers and members agents

A

FCA

25
Q

What is the FCA’s strategic objective?

A

To protect and enhance confidence in

the U.K. financial system.

26
Q

What are the FCA’s three operational objectives

A

Consumer protection
Integrity
Competition

27
Q

Which regulated fim risk category is most risky so firms get more intense supervision

A

Category 1

28
Q

Which regulated firm risk category is least risky an includes most insurance brokers

A

Category 4

29
Q

What are the three elements of the FCA’s risk framework?

A

Firm systematic framework
Event driven work
Issues and products

30
Q

Identify three areas where the FCA focus on:

A

Product governance
End-to-sales processes
Prevention of financial crime

31
Q

Which Act encourages “whistle blowing” by reducing employers ability to punish whistle blowers?

A

Public Interest Disclosure Act 1998 (PDA)

32
Q

What are Threshold Conditions?

A

The conditions a firm needs to meet to be authorised by PRA/FCA

33
Q

What is the MCR?

A

Minimum Capital Requirement

34
Q

Which organisation deals with complaints by consumers and small firms

A

Financial Ombudsman Service

35
Q

What is the maximum award the FOS can make on complaints after 1 April 2022

A

£375,000

36
Q

Identify FOS eligible complainants

A

consumer;
* micro-enterprise with fewer than ten employees and a turnover or balance sheet total of no more than €2m*;
* charity with an annual income of less than £6.5m;
* trustee of a trust with a net asset value of less than £5m;
* consumer buy-to-let (CBTL) consumer;
* small business with an annual turnover of less than £6.5m and fewer than 50 employees or a balance sheet total of less than £5m; or
* guarantor.

37
Q

Which organisation compensate customers whose insurers are insolvent

A

Financial Services Compensation Scheme (FSCS)

38
Q

What protection does FSCS give for compulsory insurances eg Employers Liability and Motor Liability

A

100%

39
Q

What protection does FSCS give for non-compulsory insurance

A

90% but only for consumers nd small firms

40
Q

How is FSCS funded?

A

Levy ona ll authorised firms

41
Q

Identify three pieces of financial information regulated firms have to supply to regulator

A

revenue account – shows the underwriting profit or loss;
* profit and loss account
* balance sheet

42
Q

What is the solvency margin

A

Assets - liabilities

43
Q

What are three options for new Lloyd’s member to invest in Lloyd’s?

A

Set up a new corporate member or Name to participate in syndicates that already exist.
* Set up a new corporate member or Name and a new syndicate.
* Set up a new corporate member or Name, a new syndicate and its own managing agent to run the syndicate.

44
Q

Two main types of regulation at Lloyd’s

A

Byelaws and requirements.

45
Q

5 types of unacceptable behaviour in Lloyd’s

A

Dishonesty
Forging or faking documents
Failure yo loa after money on trust
Failure to organise or control business
Act or omissions which could damage Lloyd’s brand

46
Q

Who is the regulatory body within Lloyd’s

A

Council of Lloyds’

47
Q

Six activities of Council of Lloyd’s

A

making or changing byelaws;
* setting the long-term strategic development of the market;
* deciding contribution levels to Lloyd’s Central Fund (covered in more detail in study text LM2);
* deciding the amounts of members’ (Names’) annual subscriptions;
* appointing members of Council and members of the committee of the Council; and
* reviewing budgets and plans.

48
Q

4 powers of Council of Lloyd’s

A

ule-making power – can create market ‘laws’ known as byelaws;
* management and superintendence of all affairs of Lloyd’s;
* right to exercise any of the powers of the Society of Lloyd’s; and
* power to direct the insurance business at Lloyd’s.

49
Q

3 obligations of Lloyd’s managing gents

A
  • File an annual solvency test return
  • Assess the capital needed in order to engage in the insurance business planned
  • Put into place and maintain controls over risks such as market risks and credit risks.
50
Q

What type of license does Lloyd’s have in all 50 states

A

Surplus lines

51
Q

What does ESG stand for

A

Environmental, social and governance

52
Q

4 main areas of Lloyd’s ESG agenda

A
  • Strategy and governance.
  • Climate.
  • Culture.
  • Communities.
53
Q

FCA’s new Principle 12 - Consumer Duty

A

‘A firm must act to deliver good outcomes for retail customers’)

54
Q

Who is a consumer in the FCA regulation

A

a natural person who is acting for purposes which are outside their trade or profession.

55
Q

Who is a commercial customer under FCA regulation?

A

a customer who does not fall into the consumer definition

56
Q

FCA’s11 principles ?

A
  1. Integrity
  2. Skill, care and diligence
  3. Management and control (SYSC)
  4. Financial prudence
  5. Market conduct
  6. Customers’ interests
  7. Communications with clients
  8. Conflicts of interest
  9. Customers relationships of trust
  10. Client’s assets
  11. Relations with regulators
57
Q

What can FCA do if it finds problems?

A

ban products in the retail sector;
* withdraw misleading financial promotions; and
* fine or prosecute individuals and organisations.

58
Q

Who is

A

LM1 (9 decks)

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