1. The Insurance Companies Act 1982 was repealed in 1996 and replaced by the Financial Services and Markets (FSM) Act 2000. Under the FSM Act, the FSA's Handbook of Rules and Guidance becomes the new law for insurers, covering financial prudence and conduct of business.
2. Firms will need to demonstrate they have effective oversight and control of their business, including adequate risk management arrangements. Senior managers can be publicly reprimanded or fined by the FSA for regulatory failures.
3. The FSA has wider powers relating to information gathering, investigations, intervention and enforcement than previous enforcement agencies. The new rules will strengthen the FSA's ability to respond when risks materialise in individual firms or markets. There will be a stronger focus on business plans and strategy.
4. Insurance regulation will be more proactive based on a more consistent risk-based approach under the FSA's New Regulatory Approach.
5. Insurance companies will be required to submit their regulatory returns more quickly - four months for 2001 year ends, three months thereafter.
6. The Act introduces a new regulatory regime for Lloyd's based on the principle that Lloyd's policyholders should have the same level of protection as elsewhere in the insurance market.
7. The regulations introduced changes to the prudential regime for insurance companies as part of the integrated FSA approach to prudential regulation. New group solvency requirements and enhanced disclosure requirements for with-profits funds are included. Later there will be more fundamental changes including rules that require insurers to undertake stress and scenario testing in assessing their capital adequacy plus additional requirements for risk management systems and controls.
8. The FSA insurance division brings together prudential and conduct of business regulators and insurance actuaries from the Government Actuary Department (GAD) working on one floor.
9. Actuaries have new whistle-blowing duties under the FSM Act. The FSA handbook sets out their duties more explicitly.
10. FSA managing director John Tiner is directing a special project to look at the lessons for insurance regulation from episodes such as Equitable Life and Independent Insurance. It will cover the life and non-life insurance sectors; prudential and conduct of business rules and regulatory processes.