Context
The FCA has updated its web page about PS21/11 – the second Pricing Practices remedies Policy Statement.
Key points to note
The updated page now includes a section where the updates are set out and the 23rd September update is about the application of the PROD Rules to products distributed through distributors based outside the UK and intended for non-UK customers.
Concerns raised by firms and trade associations
Manufacturers who design products which are sold through overseas intermediaries to cover non-UK risks for customers based outside the UK are also required to comply with the enhanced PROD 4.2 rules. However, distributors outside the UK are typically not subject to FCA rules. The FCA wrote to general insurance and pure protection firms on 29th July 2022 setting out expectations around fair value assessments. In this letter, manufacturers’ concerns about the challenges in obtaining information from overseas distributors were noted. The FCA made the industry aware that it is considering the options available in response to situations where firms can’t comply with requirements despite taking all reasonable steps to obtain the required information.
FCA expectations for manufacturers whose products cover non-UK risks and are intended for non-UK customers
The FCA is currently considering longer-term ways to address the practical difficulties manufacturers are facing in meeting the PROD 4.2 requirement to obtain information from non-UK distributors when undertaking the fair value assessment.
In the interim, expectations on manufacturers that sell products through overseas distributors that exclusively cover non-UK risks for overseas customers, are as follows:
- Where manufacturers are required to obtain fair value related data/information from overseas distributors but have been unable to do so, the FCA expects them to take reasonable steps to complete the fair value assessment required by the rules, including using data they may already hold or have been able to obtain for example on the total price paid by the customer.
- However, where the requested information cannot be obtained from the overseas distributors, the FCA does not expect manufacturers to report this to us as non-compliance with PROD 4.2.
For more information, please refer to the latest updates on the FCA website.
Next actions
None – for information and awareness.