FCA proposes amends to product governance rules for GI and pure protection products distributed overseas

The FCA has outlined plans (CP22/26) to disapply certain product governance obligations in respect of the manufacture and distribution of non-investment insurance products distributed to customers outside the UK. 

Under rules introduced in October 2021 (PS21/5), manufacturers of GI and pure protection products are required to have exhaustive product approval processes in place - in particular, to establish if products provide fair value. This assessment requires certain information to be obtained from distributors. 

With the transitional period to comply with these obligations having passed, the FCA has been further reflecting on the implications of these rules. It has heard from firms who have had difficulties sourcing information from overseas firms outside of the FCA's jurisdiction. The FCA recognises that in overseas markets, local rules will often apply and regulators in those markets will be alive to determining what measures are required. 

With that in mind, the FCA is proposing changes to the relevant PROD rules:

• where a firm manufactures or distributes a non-investment insurance product exclusively to customers outside the UK (i.e. the person is habitually resident overseas and, where relevant, the risk is situated outside the UK), the enhanced rules in PROD 4.2 and 4.3 which were introduced in PS21/5 will be disapplied;
• where a firm manufactures or distributes a non-investment insurance product within the UK and overseas, the enhanced rules introduced in PS21/5 will generally continue to apply in fully - except that firms' determination of fair value will only require information to be reviewed in respect of UK distribution channels.

The consultation closes on 9 January, with the FCA expected to confirm the changes in due course.