Employers Liability Registers

Transcription

1 Employers Liability Registers Working in partnership with you to perform an independent audit to meet the FSA s requirements on

2 What are the FSA employers liability requirements? The FSA published updated rules and guidance on Employers Liability requirements in its Handbook ICOBs 8 (Chapter 4) on 29 March This was released through the Employers Liability Insurance: Disclosure by Insurers (No. 2) Instrument These changes represent the final rules and guidance following a period of FSA public consultation which took place from December 2011 to February 2012 via Consultation Paper 11/27. This publication provides a summary of the key obligations under the final FSA employers liability rules. Who is impacted? The FSA s requirements are applicable to all general insurers carrying out UK commercial lines employers liability insurance hereafter referred to as firms in this document, including: all insurers and/or Lloyd s Managing Agents that are managing the underwriting capacity at a Lloyd s syndicate with permission to carry out employers liability general insurance contracts in the UK, including business accepted under reinsurance to close all relevant incoming EEA firms or incoming Treaty firms including those providing cross border services. Timeline The below timeline illustrates the key milestones for meeting Employers Liability requirements: Q2 Q3 Q4 Q1 Q2 Q3 The FSA requires all general insurers who have actual or potential liability for UK commercial lines employers liability policies, specifically those entered into, renewed or under which a claim is made on or after 1 April 2011 to: publish a detailed Employers Liability Register (ELR) disclosing all relevant employers liability policies produce annual Directors representations via a Director s Certificate obtain independent assurance via an annual audit report over the accuracy and completeness of the ELR as at 1 April The deadline for the first Directors Certificates and independent audit reports to be submitted to the FSA is 1 August These requirements have emerged as part of greater FSA efforts to assist consumers with employers liability claims, helping them to trace the correct insurer for their claim. This is particularly crucial where previous employers no longer exist or policies cannot easily be located. Firms have two options in how they present their ELR and the relevant policy data. These options are: to use their own ELR (created and managed directly by the firm). This must be accessible via the internet and hosted on the firm s own website to make use of an external, centralised tracing office facility, such as that published by the Employers Liability Tracing Office service ( on which to host the firm s ELR. Even where a firm chooses to use a tracing office, the firm must still have an independent audit of its ELR requirements (with respect to the underlying records maintained by the firm and provided to the tracing office). Qualifying tracing offices (subject to FSA permission) may obtain their own independent reasonable assurance, including an audit opinion, on the accuracy and reliability of how firms information has been stored in its centralised ELR. Further details of the key requirements on firms are provided in the Key Areas of Focus section. Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Aug April 2011 Firms required to publish initial Employers Liability Registers from 1 April 2011 per FSA ICOBS 8.4 rules. 6 December February 2012 FSA consultation on amendments to the form and scope of ELR audit reports and technical changes commenced 6 December 2011 closed 6 February March 2012 FSA updated Employers Liability rules agreed by FSA Board. Published on 29 March 2012 as updates to ICOBS April 2012 A Director s Certificate should be produced and an audit report for the ELR obtained as at 1 April 2012 for first year reporting and subsequently no later than 12 months from this date on an annual basis. 1 August 2012 Directors Certificates and audit reports for first year reporting as at 1 April to be sent to the FSA no later than 1 August August 2014 End of Agreed-Upon- Procedures audit transitional provisions limited assurance audits thereafter only. 2 3

3 What are the key areas of focus for employers liability requirements? The updated ICOBs 8.4 rules outline fundamental areas of focus for firms ELR compliance. Directors certificates Directors Certificates and independent audit reports on ELRs as at 1 April 2012 are due to be obtained by firms by 1 August FSA Handbook ICOBs requirements state that written representations by Directors (through a Director s Certificate) must confirm that, to the best of the Director s knowledge, the ELR has been properly prepared in accordance with ICOBS 8.4 requirements (around completeness, accuracy and specified forms of data held in the ELR). Directors will be required to state whether their ELR has been produced in a way that is materially compliant with the FSA requirements (with regard to the ELR production and avoidance of inaccuracy or false reproduction of policy details to enable a successful claimant search). This means with an error or omission rate of less than 1% Directors are required to include a description of this material compliance in their Certificate. Adequate records management and retention Firms must ensure that robust records (in relation to policies issued or renewed, claims and other relevant information) are maintained for the purposes of claimant enquiries, reporting to the FSA and accurate and complete presentation in the ELR. Notification to the FSA Firms are required to make certain notifications to the FSA under FSA Handbook ICOBS and rules (on new or changes to relevant policy or claim information, as well as changes in the firm s potential liability under excess policies subject to certain conditions) via specified notification templates. Maintenance and assurance over the ELR Firms with relevant policies and claims must make their ELRs available, either on their website or using a qualifying tracing office to host the register. Firms have three months from the date that a policy is issued, renewed or a claim is made to include details of the policy on their ELR. Insurers must have appropriate systems and controls in place to enable them to maintain their ELRs in accordance with the FSA s rules. Adequate records management and retention Notification to the FSA Employers Liability Requirements Directors certificates Audit reports Where this representation of material compliance cannot be provided, a qualified statement is required describing any non-compliance; data on the number of policies affected; a description of the systems and controls used in the ELR production and when errors or omissions will be corrected. Additional requirements relating to Directors Certificates are outlined in the FSA Handbook ICOBS 8.4. Audit reports The current FSA Handbook ICOBS 8.4 rules require that the first audit report with respect to the ELR is produced and sent to the FSA by 1 August 2012, relating to the ELR and its associated records as at 1 April 2012 (with subsequent annual reassessment). Auditors reports will be available to the insurer, the FSA and any Tracing Office the insurer uses. Subsequent Directors Certificates and audit reports following the first 2012 year of reporting must be obtained at least annually thereafter and submitted to the FSA no more than four months from the effective audit date of the ELR. The FSA have reiterated the importance of such governance and control through the updated ICOBs 8.4 rules and guidance, which require Directors to make representations (via a Director s Certificate) on the systems and controls used in the production of the ELR. Where the Director s Certificate cannot attest to this (due to material non-compliance, errors or failures in the systems and controls), the Director s Certificate should provide relevant timescales for remediation. Maintenance and assurance over the ELR The ELR must be accessible for tracing purposes (with restrictions around copying or downloading of information) to reflect employers liability policies taken out, renewed or in respect of which a claim is received or is outstanding on or after 1 April

4 Transitional options for the audit report on ELR Key questions/ challenges The previous sections have highlighted several areas firms need to consider in completing and producing an ELR that meets the FSA s requirements. To further assure these requirements are met, in preparing for such audits, there are several key questions that general insurance firms should be asking themselves and should be able to answer. These include the following: The FSA has provided, in its updated ICOBS 8.4 rules (within Appendix TP1 on Transitional Provisions), two options for the first two years of production of audit reports (i.e. from 1 April 2012 to 1 August 2014). For audit reports produced for periods after 1 August 2014, there is just one option. Limited Assurance Audit Auditors will be required to perform limited assurance engagements. A limited assurance audit will provide an opinion that the auditor has found no reason to believe the firm is not materially compliant with FSA rule requirements in production of its ELR. Such material compliance is in regard to the firm s extraction of information from its underlying records and the firm s management of risks or errors of omissions in the underlying records and presentation in the ELR. Year 1 (as at 1 April 2012) OR Agreed-Upon-Procedures Audit Transitional arrangements are available, for limited periods and subject to certain conditions, for auditors to perform an agreed-upon-procedures (AUP) audit instead. The transitional arrangements are only available until 1 August 2012 (first year reporting) for all firms, unless From 1 August 2014 onwards the firm has been unable to issue an unqualified Director s Certificate. Such firms will be permitted to use AUP audits until the earlier of i) the date upon which the firm first obtains an unqualified Director s Certificate, or ii) 1 August AUP engagements require more prescribed procedures and sampling methodology, which the FSA have specified, but with no opinion provided by the auditor. This has been introduced to reflect the FSA s acknowledgement of phased, transitional efforts required for the industry to meet the new rules. Limited Assurance audit engagements and reports only Are we confident in our understanding and adherence to the new FSA requirements around the ELR? Do we have the requisite skills and knowledge of employers liability requirements and their practical application within our internal teams, or is external assistance required for compliance? Are we adequately mitigating the risks that our ELR is incomplete or inaccurately compiled from underlying data through robust internal control systems and governance? Have we confidence that our records of policies and claims data within our internal systems are fundamentally accurate and complete and have adequate granular detail? Have we established strong governance and oversight over employers liability processes, particularly given that Directors representations (via a Director s Certificate) are required by the FSA? Have we appropriately identified any in-scope reinsurance to close and excess polices where the new FSA conditions for ELR inclusion are satisfied? Have we engaged independent audit support and discussed the scope, timing and performance of the audit engagement to meet regulatory deadlines? Do we wish to make use of any FSA transitional measures (providing options for audit approach) for the first year of regulatory audit reporting in 2012? Grant Thornton recognises that the first year of reporting in 2012 may prove to be the most onerous and time-consuming for firms. We are able to provide you with a team that is extensively experienced to deliver an efficient and effective audit to meet the FSA challenges. Grant Thornton are able to provide an unparalleled service, underpinned by keen regulatory insight and a commitment to strong and open client relationships, to help your firm overcome the challenges of the ELR audit. 6 7

5 Why Grant Thornton? Grant Thornton s team of Business Risk professionals are ideally placed to assist your firm with the FSA ELR audit. Our seasoned Insurance audit experts can provide your firm with objective assurance over your employers liability systems, controls and risk management and deliver the audit and assurance services you need to meet the FSA requirements. Who should I contact for assistance? Sandy Kumar Partner T E sandy.kumar@uk.gt.com Stephen Leckie T E stephen.leckie@uk.gt.com Sarah Talbott T E sarah.d.talbott@uk.gt.com Kiran Sudhakar T E kiran.sudhakar@uk.gt.com How we can help Grant Thornton s Business Risk Services team can assist in a number of ways, including the provision of: robust, independent audits of ELRs, in line with FSA requirements and produced to meet required UK regulatory timeframes delivery of efficient and thorough audits performed by seasoned Insurance audit specialists with deep regulatory and sector knowledge 2012 Grant Thornton UK LLP. All rights reserved. Grant Thornton means Grant Thornton UK LLP, a limited liability partnership. Grant Thornton UK LLP is a member firm within Grant Thornton International Ltd ( Grant Thornton International ). Grant Thornton International and the member firms are not a worldwide partnership. Services are delivered by the member firms independently. This publication has been prepared only as a guide. No responsibility can be accepted by us for loss occasioned to any person acting or refraining from acting as a result of any material in this publication. independent assurance and validation over your employers liability processes and controls, as well as providing you with pragmatic suggestions for improvement where required a commitment to excellent and long-lasting client relationships guiding you through new and evolving FSA requirements in this area. V21530