A number of members have raised regulatory queries with us following the significant and very publicly scrutinised work on the issue of Multi-occupancy buildings insurance and the question of commission and fee disclosure by ‘intermediaries’. The FCA language defining an insurance intermediary does not overtly differentiate between an insurance broker and an MGA and the question of whether the FCA intends for MGAs, acting as agents of an insurer, to disclose their work transfer earnings has been the subject of discussion between myself and the FCA, in our role as the representative trade association for Managing General Agents. I’m pleased to say we have found the FCA to be responsive and helpful and I have summarised below the background to the issue raised and the clarification now provided to us by the FCA.
Background
Following a high-profile review of the market relating to the placement of insurance for multi-occupancy buildings insurance, the FCA issued its Policy Statement and Final Rules in September 2023. This included new rules, under ICOBS, relating to commission and fee disclosure by ‘intermediaries’.
ICOBS 6A.7 – “Disclosure requirements for multi-occupancy buildings insurance” – sets out the obligation in full. It says that:
“As soon as reasonably practicable after the conclusion of a multi-occupancy building insurance contract, and upon any subsequent renewal, a firm must…. give the customer… remuneration information (in accordance with ICOBS 6A.7.8R)”
This clause is in addition to ICOBS 4.3 and 4.4 which already dealt with remuneration disclosure and commission disclosure for commercial customers. The question that arises is whether in this context ‘firm’ relates to all insurance intermediaries or only those acting on behalf of the customer – the building freeholder and its agents.
FCA Clarification
The MGAA requested clarification from the FCA on this issue and has received a written response.
The purpose of the new rules on multi-occupancy buildings insurance are to improve transparency in relation to charges (including commission and fees paid to an intermediary) for insurance passed on the leaseholders as part of their tenancy charges. In that context, the FCA has now provided clarification that in its view, it is the remuneration that relates to the placement of insurance by the insurance broking intermediary that is subject to disclosure. It does not see the rules applying to any remuneration to the MGA for work transfer from the insurance company.
There is a caveat – that the business is introduced to the MGA by an insurance broker, who is being remunerated for their work doing so. Assuming the response to that caveat is positive, the FCA view is that the MGA is acting as agent for, and undertaking the work of, the insurance company and is not subject to the commission and fee disclosure rules.
Conclusion
Where an MGA is:
- Distributing multi-occupancy buildings insurance on behalf of an insurance company; and
- Selling that product only to policyholders who are themselves represented by a regulated insurance intermediary as part of the overall distribution chain;
then the FCA has provided clarification that its general position is that the new provisions contained in ICOBS 6A.7 do not apply to the MGA in respect of its earnings for the work transfer from the insurance company.
Whilst the scenario described is that which will prevail in the vast majority of scenarios involving MGAA members acting as co-manufacturers of multi-occupancy buildings insurance, we anticipate there are likely to be a small number of nuanced scenarios. If you feel your own situation may be one of those you are encouraged to seek professional advice if you are in any doubt as to your regulatory obligations. MGAA members are reminded that as part of their membership benefits, they are entitled to receive an element of free advice from the Associations Compliance & Regulatory partner, ICSR. Please contact them on mgaasupport@icsr.co.uk if you would like to speak with them.
Mike Keating
CEO, MGAA.
