Keeping track of the multitude of legal and compliance issues worldwide is a major challenge for insurers. And in recognition of this challenge, the Lloyd’s Market Association has bolstered its expertise to help the market’s legal counsel and compliance officers.
Expert legal advice
Toward the end of last year the LMA appointed Kees van der Klugt to the newly created post of Head of Legal and Compliance. Van der Klugt is well qualified for his role at the LMA, where he will be helping the association and its members with a rising tide of regulatory developments. A qualified solicitor, he has over 20 years’ experience in the insurance market, including stints within the regulatory department at Lloyd’s, and latterly as Compliance Officer of Amlin Underwriting.
Market asset
The Lloyd’s market has a long history of dealing with legal and compliance issues, and has accumulated considerable expertise, said Van der Klugt. Lloyd’s syndicates and agencies have successfully undergone numerous regulatory challenges, both at home and overseas, he explained. For example, the Lloyd’s Act 1982, the creation of the Financial Services Authority in 1997 and the EU’s Insurance Mediation Directive have all brought significant regulatory change. The Lloyd’s market has a good track record with dealing with these and other legal and compliance issues, said Van der Klugt.
“The compliance and legal expertise in the Lloyd’s market is a tremendous resource for London. I have always been impressed with the expertise in the market, and the willingness of members’ compliance and legal teams to get involved and resolve market issues.
“It has also been an interesting experience working with the Lloyd’s experts in various areas–I have seen a lot of them since joining the LMA and take my hat off to their know-how.”
Staying one step in front
Regulatory changes continue at a pace for insurers, with Europe’s proposed regime for insurers, Solvency II, at the top of the list. But while Solvency II is a critical project for Lloyd’s and the LMA, there are many regulatory issues that require insurers’ attention, according to Van der Klugt.
“The LMA is conscious of the aftershock of the financial and banking crisis. There is likely to be a raft of regulatory developments that will encompass insurers, and we must make sure that any proposals work for our members,” he said. A key regulatory and compliance issue is keeping abreast of the sheer amount of what is going on in the UK, Europe and worldwide, said Van der Klugt.
There are currently a number of regulatory and compliance issues on the LMA’s radar, said Van der Klugt. For example, in the United Kingdom the FSA is likely to review its remuneration code, which currently applies to banks, but may be extended to include insurers.
In a gritty area, the LMA with its members and Lloyd’s is in discussion with the Department of Business, Innovation and Skills and HMRC on the implementation of the Export Control Order. The developing statutory framework relating to financial crime needs to be kept under review, he said.
Further afield, there are also moves in Canada to clarify their insurance regulations, and this is creating substantial work for Lloyd’s and the LMA, which is helping members with the changes, he said.
The LMA is also keeping watch on proposals in the United States that could see some degree of federal regulation introduced for insurance-the US insurance market is currently regulated on a state by state basis, he said. There are other issues in the United States, such as changes to the social insurance program Medicare, which will affect the market, said Van der Klugt.
And in Europe there are also plans to review the Insurance Mediation Directive-which sets rules for sale of insurance-and to create three new European Supervisory Authorities, one of which will have a bearing on general insurance.
“One of the key roles for legal counsel and compliance officers is to give management a heads up on all the emerging issues, and make sure that their companies are not taken by surprise. At the LMA we are keeping an eye on regulatory developments and working with Lloyd’s and other supervisors on these.”
Market approach to legal issues
In-house lawyers in the Lloyd’s market do not only have to keep abreast of regulatory changes, they also provide advice on a raft of legal issues, whether company law, employment law, or at the coal-face with insurance documentation and claims, said Van der Klugt.
While many issues are specific to individual firms, there are some that spill over and become market matters, and this is where the LMA is able to assist its members, he said.
For example, the market’s ongoing efforts to improve standards of insurance documentation and processes still further, and legal issues surrounding electronic placement and claims, are areas of work for the LMA.
There are also proposals to reform insurance contract law in the United Kingdom. In December 2009, the Law Commissions of England and Wales and Scotland recommended changes to insurance law for consumers. As and when Law Commission proposals are made in this and other areas, the LMA will consult with its members and respond where these are significant for the Lloyd’s market, said Van der Klugt.
