Grant Thornton - Employers’ Liability Registers UK


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Grant Thornton - Employers’ Liability Registers UK

  1. 1. Employers’ LiabilityRegistersWorking in partnership with you to performan independent audit to meet the FSA’srequirements on Employers’ Liability Registers
  2. 2. Employers’ Liability Registers Employers’ Liability RegistersWhat are the FSA employers’ Who is impacted?liability requirements? 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 The FSA published updated rules and guidance on Employers’ Liability requirements syndicate with permission to carry out employers’ liability general insurance contracts in the UK, including business accepted under reinsurance to close in its Handbook ICOBs 8 (Chapter 4) on 29 March 2012. This was released through the Employers’ Liability Insurance: Disclosure by Insurers (No. 2) Instrument 2012. • all relevant incoming EEA firms or incoming Treaty firms including those providing cross border services. 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. Timeline The below timeline illustrates the key milestones for meeting Employers’ Liability requirements: This publication provides a summary of the key obligations under the final FSA employers’ liability rules. Q2 Q3 Q4 Q1 Q2 Q3 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Aug 2011 2012 2014 The FSA requires all general These requirements have emerged as part of greater FSA insurers who have actual or efforts to assist consumers with employers’ liability potential liability for UK claims, helping them to trace the correct insurer for 1 April 2011 21 March 2012 commercial lines employers’ their claim. This is particularly crucial where previous 6 December 2011- Firms required 6 February 2012 FSA updated Employers’ liability policies, specifically those employers no longer exist or policies cannot easily be to publish initial Liability rules agreed by FSA consultation entered into, renewed or under located. Employers’ Liability on amendments FSA Board. Published Registers from 1 on 29 March 2012 as which a claim is made on or after 1 Firms have two options in how they present their ELR April 2011 per FSA to the form and updates to ICOBS 8.4. scope of ELR April 2011 to: and the relevant policy data. These options are: ICOBS 8.4 rules. audit reports and technical changes • publish a detailed Employers’ • to use their own ELR (created and managed directly by – commenced 6 1 April 2012 December 2011 – Liability Register (ELR) the firm). This must be accessible via the internet and closed 6 February A Director’s Certificate should be produced and disclosing all relevant employers’ hosted on the firm’s own website 2012. an audit report for the ELR liability policies obtained as at 1 April 2012 for first year reporting and • to make use of an external, centralised tracing office subsequently no later than • produce annual Directors’ facility, such as that published by the Employers’ 12 months from this date representations via a Director’s Liability Tracing Office service ( on an annual basis. Certificate on which to host the firm’s ELR. Even where a firm chooses to use a tracing office, the firm must still have 1 August 2012 Directors’ Certificates and audit • obtain independent assurance via an independent audit of its ELR requirements (with reports – for first year reporting as an annual audit report over the respect to the underlying records maintained by the at 1 April 2012 - to be sent to the FSA no later than 1 August 2012. accuracy and completeness of the firm and provided to the tracing office). Qualifying ELR as at 1 April 2012. tracing offices (subject to FSA permission) may obtain 1 August 2014 their own independent reasonable assurance, including End of Agreed-Upon- The deadline for the first Directors’ an audit opinion, on the accuracy and reliability of how Procedures audit transitional provisions – limited assurance Certificates and independent audit firms’ information has been stored in its centralised audits thereafter only. reports to be submitted to the FSA ELR. Further details of the key requirements on firms is 1 August 2012. are provided in the Key Areas of Focus section.2 3
  3. 3. Employers’ Liability Registers Employers’ Liability RegistersWhat are the key areas offocus for employers’ liability Directors’ certificates Directors’ Certificates and independent audit reports on ELRs as at 1 April 2012 are due to be obtained by firms by 1 Augustrequirements? 2012. 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 ‘materiallyThe updated ICOBs 8.4 rules outline fundamental 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).areas of focus for firms’ ELR compliance. 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 Where this representation of material compliance cannot be provided, a qualified Firms must ensure that robust records (in relation to policies issued or renewed, statement is required describing any non-compliance; data on the number of claims and other relevant information) are maintained for the purposes of Adequate records Directors’ policies affected; a description of the systems and controls used in the ELR claimant enquiries, reporting to the FSA and accurate and complete presentation production and when errors or omissions will be corrected. in the ELR. management and certificates Additional requirements relating to Directors’ Certificates are outlined in the FSA retention Handbook ICOBS 8.4. Notification to the FSA Firms are required to make certain notifications to the FSA under FSA Handbook ICOBS 8.4.6 and 8.4.11 rules (on new or changes to relevant Audit reports policy or claim information, as well as changes in the firm’s potential The current FSA Handbook ICOBS 8.4 rules require that the first audit liability under excess policies subject to certain conditions) via specified report with respect to the ELR is produced and sent to the FSA by 1 notification templates. Employers’ August 2012, relating to the ELR and its associated records as at 1 April Liability 2012 (with subsequent annual reassessment). Maintenance and assurance over the ELR Firms with relevant policies and claims must make their ELRs Requirements Auditors’ reports will be available to the insurer, the FSA and any Tracing Office the insurer uses. available, either on their website or using a qualifying tracing office to host the register. Firms have three months from the date that a Notification to Audit reports Subsequent Directors’ Certificates and audit reports following policy is issued, renewed or a claim is made to include details of the policy on their ELR. the FSA 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. Insurers must have appropriate systems and controls in place to enable them to maintain their ELRs in accordance with the FSA’s rules. The FSA have reiterated the importance of such governance and control Maintenance 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 and assurance 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 over the ELR provide relevant timescales for remediation. 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 2011.4 5
  4. 4. Employers’ Liability Registers Employers’ Liability RegistersTransitional options for Key questions/ 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,the audit report on ELR challenges there are several key questions that general insurance firms should be asking themselves and should be able to answer. These include the following: Are we confident in our understanding and adherence to the new FSA requirements aroundThe FSA has provided, in its updated ICOBS 8.4 rules (within Appendix the ELR?TP1 on Transitional Provisions), two options for the first two years ofproduction of audit reports (i.e. from 1 April 2012 to 1 August 2014). 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?For audit reports produced for periods after 1 August 2014, there is justone option. Are we adequately mitigating the risks that our ELR is incomplete or inaccurately compiled from underlying data through robust internal control systems and governance? Year 1 (as at 1 April 2012) 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?Limited Assurance Audit Agreed-Upon-Procedures AuditAuditors will be required to perform limited Transitional arrangements are available, for limitedassurance engagements. periods and subject to certain conditions, for auditors Have we established strong governance and oversight over employers’ liability processes, particularly to perform an agreed-upon-procedures (AUP) audit OR given that Directors’ representations (via a Director’s Certificate) are required by the FSA?A limited assurance audit will provide an opinion that instead.the auditor has found no reason to believe the firm isnot materially compliant with FSA rule requirements The transitional arrangements are only available until 1 Have we appropriately identified any in-scope reinsurance to close and excess polices where thein production of its ELR. August 2012 (first year reporting) for all firms, new FSA conditions for ELR inclusion are satisfied?Such material compliance is in regard to the firm’s unlessextraction of information from its underlying recordsand the firm’s management of risks or errors of the firm has been unable to issue an unqualified Have we engaged independent audit support and discussed the scope, timing andomissions in the underlying records and presentation Director’s Certificate. Such firms will be permitted performance of the audit engagement to meet regulatory deadlines?in the ELR. 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 2014. 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? AUP engagements require more prescribed procedures and sampling methodology, which the FSA have specified, but with no opinion provided by Grant Thornton recognises that the first year of reporting in 2012 may prove to be the most the auditor. This has been introduced to reflect the onerous and time-consuming for firms. FSA’s acknowledgement of phased, transitional efforts required for the industry to meet the new rules. 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. From 1 August 2014 onwards 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 Limited Assurance audit engagements and reports only overcome the challenges of the ELR audit.6 7
  5. 5. Why Grant Thornton? Grant Thornton’s team of Financial Services 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 forassistance? How we can help Grant Thornton’s Business RiskSandy Kumar Sarah TalbottPartner Associate Director Services team can assist in a numberFinancial Services Financial Services of ways, including the provision of:Business Risk Services Business Risk ServicesT 020 7728 3248 T 020 7865 2815E E • robust, independent auditsStephen Leckie Kiran Sudhakar of ELRs, in line with FSAAssociate Director Associate Director requirements and produced toFinancial Services Financial ServicesBusiness Risk Services Business Risk Services meet required UK regulatoryT 020 7728 2165 T 020 7728 2909 timeframesE E • delivery of efficient and thorough audits performed by seasoned Insurance audit specialists with deep regulatory and sector knowledge • independent assurance and validation over your employers’ liability processes and controls,© 2012 Grant Thornton UK LLP. All rights reserved. as well as providing you with‘Grant Thornton’ means Grant Thornton UK LLP,a limited liability partnership. pragmatic suggestions forGrant Thornton UK LLP is a member firm within improvement where requiredGrant Thornton International Ltd (‘Grant Thornton International’).Grant Thornton International and the member firms are nota worldwide partnership. Services are delivered by the member • a commitment to excellent andfirms independently. long-lasting client relationshipsThis publication has been prepared only as a guide. guiding you through new andNo responsibility can be accepted by us for loss occasionedto any person acting or refraining from acting as a result of evolving FSA requirements inany material in this publication. this