Here’s what’s new on www.ey.com in the Banking & Capital Markets industry for the week ending 19 February 2016.
Chief compliance officers around the world report that substantial changes have taken place in many compliance functions, with more likely to follow.
For today’s chief compliance officer (CCO), the insurance sector continues to pose new challenges and opportunities on a seemingly daily basis.
This report captures feedback gained during 2015 from CCOs in 20 global insurance entities with head offices in Europe, North America, Africa and Asia. Our findings indicate that substantial changes have taken place in many compliance functions, while others are still underway with more likely to follow.
Seven key themes (below) emerged, offering a valuable snapshot of compliance as it is today.
Seven key findings
|1||Compliance plays a significant role in achieving organizational success
Our findings show that the compliance function is recognized as playing an important part in the control framework, engaging closely with C-suite or executive leadership.
Reporting lines tend to reflect the location of the group compliance function and the regulatory environment in which it operates.
For most insurance entities, compliance activity takes place at both group and local levels .
|2||Compliance activity levels are high, with widespread and increasing use of assessments, monitoring and testing
When defining risks, 50% of compliance functions surveyed define their risks using an inventory of laws, though the approach is most dominant in the US.
All survey participants conduct compliance risk assessments, and all entities surveyed monitor key controls in the first line of defense. The majority of compliance functions surveyed also undertake screening of sanctions checks, third-party payments or other financial crime controls, with some entities using dedicated teams from outside the compliance function for this work. Reviews of financial promotions and marketing material are also common.
|3||Reporting of compliance activity is extensive
In many insurance entities, CCOs report to their board or senior executives at least quarterly.
The results of compliance activity are widely reported, both locally and to group compliance. Local reports are often aggregated for group reporting purposes, with some firms having achieved a degree of standardization of quantitative information.
|4||Regulatory interaction is frequent
Compliance owns the relationship with the regulator in 38% of insurance entities surveyed. The regulator relationship varies depending on factors such as legal and regulatory changes, market conditions and location.
Primary regulator interaction is frequent, taking place at least monthly for the majority of compliance functions. Regulatory visits occur at least annually for 65% of survey participants.
|5||Consumer protection is high on the CCO agenda
72% of CCOs surveyed say their business is feeling the impact of new regulation and shifts in regulatory focus around consumer protection.
Insurance entities are responding in several ways, such as developing group-wide consumer protection standards to encourage consistency across the business and developing consumer protection strategies alongside business units. Other strategies include strengthening the approval process for products exposed to regulatory or reputational risk, as well as enhancing product oversight and governance processes.
|6||Huge potential remains for leveraging technology
Most firms have the capability to collate, analyze and share information in some way. However, 77% of CCOs surveyed describe their compliance technology as “basic” – at least in many areas of the organization.
Among the minority who consider their IT systems advanced, technology enables insider screening, monitoring of incidents or personal investments, combating money laundering and uncovering other financial crimes.
|7||How do CCOs see the future of compliance?
Compliance functions have increased in size over the last year, and further growth is likely due to :
Given these challenges, it’s not surprising that some compliance functions are having difficulty hiring and retaining talent. Where no natural talent pool exists, insurance entities are forced to develop their own compliance resources – but then risk losing them to competitors.
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