Recent regulatory intervention at insurer level – including restrictions placed on Markerstudy - is reinforcing how closely governance, funding structures and distribution models are now being examined across the insurance market, with intermediaries increasingly exposed to supervisory scrutiny that extends beyond carriers themselves.
Jeremy Irving (pictured), head of financial services regulation at Browne Jacobson, said intermediaries are becoming more aware of how regulatory focus on insurers can flow through to their own practices.
He pointed to intermediary consolidation across the insurance market, noting that some groups have expanded rapidly and have already faced close regulatory attention.
“There have been market participants and groups who have grown through consolidation and have been subject to regulatory challenge, let’s call it heavy supervision and heightened levels of reporting, on a more agreed basis with the regulator, to make sure that the growth being achieved makes sense in terms of policyholder outcomes,” he said.
Irving said concerns are heightened where growth has been funded through debt, particularly where arrangements could cause regulators to have concerns over whether adequate resources are in place for compliance, underwriting and claims controls which might affect an insurer’s ability or willingness to meet claims.
“We know from enforcement notices from the last decade that regulators are keen to ensure that insurance businesses must not leave themselves ‘short’ on operational resourcing, or over-exposed to regulatory risk, by having to dividend up or otherwise move monies up the ownership or financing chain,” he said.
While similar issues have arisen in the past, Irving said the current environment feels distinct in how openly these concerns are being addressed.
“This feels like it’s been quite some time since the issue has been addressed quite so publicly on an institutional basis,” he said.
For intermediaries, Irving said regulatory intervention at insurer level inevitably prompts closer examination of distribution practices further down the chain.
“If a regulator is looking at an insurer, is it going to be happy with the distribution methodologies and systems that insurer has, and everything that flows from that?” he said.
He warned that where insurers are caught up in regulatory challenge, intermediaries should expect knock-on effects.
“If an insurer is caught up in regulatory challenge, there’s a very decent chance that an intermediary distributor is going to feel some collateral effect from that, whether it’s directly from the regulator, or whether it’s pressure on the insurer to exert more control and oversight via the delegated authority agreement,” Irving said.
That scrutiny, he added, extends to the quality of data flowing through distribution chains from policyholder-facing intermediaries, who might face challenges. “Are we helping to put the early-stage risk and product governance data into the system in a way that’s accurate and reflects what insureds need, what they are calling for, what their risk profiles are?” he said. “Is the data around the performance and the manifestations of those risks comprehensive and accurate?”
Although the themes themselves are not new, Irving said the regulatory approach has become more explicit.
“These are themes which have been in the market for a number of years, but they’ve been quiet and they’ve been addressed more quietly,” he said. “What we’re seeing now is a much more overt point being made by the FCA, which dovetails with the PRA’s initiative. By going back to those earlier decisions of the mid-2010s and now looking at what’s happening now, I think there are some valuable lessons that can be learned.”
For intermediaries, the message is less about any single regulatory intervention and more about how explicit supervisory expectations have become. As insurers face closer scrutiny over governance, funding structures and growth models, brokers operating within delegated and distribution arrangements are increasingly part of that regulatory conversation, whether directly or through the insurers they place business with.
