By Harvey Spencer

The FCA has published its consultation paper on the Future Regulatory Framework in relation to the Insurance Distribution Directive (IDD) regime. This comes as part of the FCA's wider ongoing work to repeal and replace retained EU law (REUL) with its own rules.

The IDD was fully implemented in 2018, mostly through changes to FCA rules and partly through EU-delegated regulations.  With the latter now to be repealed, the FCA is incorporating the requirements into its Handbook.  Rather than looking to make policy changes at this stage, the FCA's aim is to provide continuity of the regulatory regime applying to insurance related activities.

No existing requirements are to be removed (and nothing new is to be introduced), and the proposals themselves include "consequential amendments and minor changes" which are primarily to "reflect the Handbook drafting style and provide greater clarity".

The FCA's approach to the IDD appears consistent with its 5 guiding principles for replacing REUL, which seek to support its overarching aim for the Handbook (to enhance the overall user experience by making it clear, accessible, and navigable, while reducing regulatory costs):

1. Consolidate requirements as far as possible so that, over time, the FCA Handbook becomes the ‘one stop shop’ for firm-facing regulatory requirements;
2. Use the current Handbook structure, only creating new sourcebooks where necessary;
3. Rely on existing requirements in the Handbook, where relevant, and consider if it is necessary to reflect the repealed REUL provisions in the Handbook;
4. Rely on outcomes rather than prescriptive requirements, where appropriate; and
5. Reduce complexity, both in drafting style and by seeking to align standards across sectors, where appropriate.

Future changes have not been ruled out, with the FCA stating in the paper that it will “continue to consider whether further, more substantial changes are required to the rules in order to deliver an appropriate regulatory regime in the future”.  In particular: 

• The FCA notes recent concerns raised about how some of its rules apply to London market business. 
• As the FCA reviews the MiFID rules, it will consider how the rules for IBIPs should operate for what may be seen as substitutable products. 

The consultation closes on 9th October 2023 and firms may feedback to the FCA before then.  Final rules will then be published, in line with the Government's timetable to repeal the relevant legislation. 

For further UK financial services regulatory updates, please visit the Burges Salmon blog.