YOUR COMPLIANCE MATTERS – FCA Multi Occupancy Leasehold Insurance reforms

YOUR COMPLIANCE MATTERS – FCA Multi Occupancy Leasehold Insurance reforms

Relevance:                   All Firms.

Action required:         Review customers subject to potential new rules, and your commercial arrangements with any parties receiving a share of your remuneration.

On 21 April 2023, the FCA published a Consultation Paper, available here FCA sets out multi-occupancy leasehold insurance reforms | FCA relating to the treatment of Leaseholders in Multi Occupancy buildings.

A ‘Leaseholder’ is a tenant within the meaning of section 30 of the Landlord and Tenant Act 1985 including a recognised tenants’ association.

CP 23/8 consults on new rules to be published in Q3 (the deadline for any response to the Consultation Paper is 9 June 2023) with a three-month implementation date.

Proposed Changes

·      Leaseholders would need to be treated as customers, requiring firms to act in the best interests of the leaseholders and bar firms from recommending products based on commission or remuneration levels.

·      Additionally, insurers and brokers will need to provide additional information to Leaseholders, including:

-     A summary of cover.

-     Pricing information.

-     Remuneration information

-     Placing and shopping around information.

-     Conflicts of interest information.

This information can be sent to the Policyholder, with an instruction to distribute it to Leaseholders (or direct to the Leaseholder if you are in touch with them).

·      For the first time, the FCA is specifying that the total amount of commission generated must be disclosed alongside information relating to any payments made to third parties (the freeholder or property managing agent, for example). These disclosures need to be in cash terms.  

·      The FCA has said ‘We expect brokers to immediately stop paying commissions to third parties (including property managing agents and freeholders) where they do not have appropriate justification and evidence for doing so in line with our rules on fair value. We will undertake further reviews across various products and will consider the full range of regulatory tools available to us as this work is progressed.’

·      You will be expected to deal with queries, either from the Policyholder, or any Leaseholder, in a way which ensures ‘Good outcomes’ for all parties.

Action Required

Once the consultation period finishes and new rules are published, the implementation date will be tight.

Clearly, there will be very little time for any current commercial arrangements to be reviewed, if you are intending to change them in advance of the rules coming into force.

We are happy to discuss any specific issues that you may have so please get in touch with your usual contact.