2. Employers’ Liability Registers Employers’ Liability Registers
What are the FSA employers’ Who is impacted?
liability requirements? The FSA’s requirements are applicable to all general insurers carrying out UK commercial lines
employers’ liability insurance – hereafter referred to as ‘firms’ in this document, including:
• all insurers and/or Lloyd’s Managing Agents that are managing the underwriting capacity at a Lloyd’s
The FSA published updated rules and guidance on Employers’ Liability requirements syndicate with permission to carry out employers’ liability general insurance contracts in the UK,
including business accepted under reinsurance to close
in its Handbook ICOBs 8 (Chapter 4) on 29 March 2012. This was released through the
Employers’ Liability Insurance: Disclosure by Insurers (No. 2) Instrument 2012.
• all relevant incoming EEA firms or incoming Treaty firms including those providing cross border
services.
These changes represent the final rules and guidance following a period of FSA public
consultation which took place from December 2011 to February 2012 via Consultation
Paper 11/27. Timeline
The below timeline illustrates the key milestones for meeting Employers’ Liability requirements:
This publication provides a summary of the key obligations under the final FSA
employers’ liability rules. Q2 Q3 Q4 Q1 Q2 Q3
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Aug
2011 2012 2014
The FSA requires all general These requirements have emerged as part of greater FSA
insurers who have actual or efforts to assist consumers with employers’ liability
potential liability for UK claims, helping them to trace the correct insurer for
1 April 2011 21 March 2012
commercial lines employers’ their claim. This is particularly crucial where previous 6 December 2011-
Firms required 6 February 2012 FSA updated Employers’
liability policies, specifically those employers no longer exist or policies cannot easily be to publish initial Liability rules agreed by
FSA consultation
entered into, renewed or under located. Employers’ Liability
on amendments
FSA Board. Published
Registers from 1 on 29 March 2012 as
which a claim is made on or after 1 Firms have two options in how they present their ELR April 2011 per FSA to the form and updates to ICOBS 8.4.
scope of ELR
April 2011 to: and the relevant policy data. These options are: ICOBS 8.4 rules.
audit reports and
technical changes
• publish a detailed Employers’ • to use their own ELR (created and managed directly by – commenced 6
1 April 2012
December 2011 –
Liability Register (ELR) the firm). This must be accessible via the internet and closed 6 February A Director’s Certificate
should be produced and
disclosing all relevant employers’ hosted on the firm’s own website 2012.
an audit report for the ELR
liability policies obtained as at 1 April 2012
for first year reporting and
• to make use of an external, centralised tracing office
subsequently no later than
• produce annual Directors’ facility, such as that published by the Employers’ 12 months from this date
representations via a Director’s Liability Tracing Office service (www.elto.org.uk) on an annual basis.
Certificate on which to host the firm’s ELR. Even where a firm
chooses to use a tracing office, the firm must still have 1 August 2012
Directors’ Certificates and audit
• obtain independent assurance via an independent audit of its ELR requirements (with reports – for first year reporting as
an annual audit report over the respect to the underlying records maintained by the at 1 April 2012 - to be sent to the
FSA no later than 1 August 2012.
accuracy and completeness of the firm and provided to the tracing office). Qualifying
ELR as at 1 April 2012. tracing offices (subject to FSA permission) may obtain
1 August 2014
their own independent reasonable assurance, including End of Agreed-Upon-
The deadline for the first Directors’ an audit opinion, on the accuracy and reliability of how Procedures audit transitional
provisions – limited assurance
Certificates and independent audit firms’ information has been stored in its centralised audits thereafter only.
reports to be submitted to the FSA ELR. Further details of the key requirements on firms
is 1 August 2012. are provided in the Key Areas of Focus section.
2 3
3. Employers’ Liability Registers Employers’ Liability Registers
What are the key areas of
focus for employers’ liability Directors’ certificates
Directors’ Certificates and independent audit reports on ELRs as at 1 April 2012 are due to be obtained by firms by 1 August
requirements? 2012. FSA Handbook ICOBs requirements state that written representations by Directors (through a Director’s Certificate)
must confirm that, to the best of the Director’s knowledge, the ELR has been properly prepared in accordance with ICOBS
8.4 requirements (around completeness, accuracy and specified forms of data held in the ELR).
Directors will be required to state whether their ELR has been produced in a way that is ‘materially
The updated ICOBs 8.4 rules outline fundamental compliant’ with the FSA requirements (with regard to the ELR production and avoidance of
inaccuracy or false reproduction of policy details to enable a successful claimant search).
areas of focus for firms’ ELR compliance. This means with an error or omission rate of less than 1% Directors are required to
include a description of this material compliance in their Certificate.
Adequate records management and retention Where this representation of material compliance cannot be provided, a qualified
Firms must ensure that robust records (in relation to policies issued or renewed, statement is required describing any non-compliance; data on the number of
claims and other relevant information) are maintained for the purposes of
Adequate records Directors’ policies affected; a description of the systems and controls used in the ELR
claimant enquiries, reporting to the FSA and accurate and complete presentation production and when errors or omissions will be corrected.
in the ELR.
management and certificates
Additional requirements relating to Directors’ Certificates are outlined in the FSA
retention Handbook ICOBS 8.4.
Notification to the FSA
Firms are required to make certain notifications to the FSA under FSA
Handbook ICOBS 8.4.6 and 8.4.11 rules (on new or changes to relevant Audit reports
policy or claim information, as well as changes in the firm’s potential The current FSA Handbook ICOBS 8.4 rules require that the first audit
liability under excess policies subject to certain conditions) via specified report with respect to the ELR is produced and sent to the FSA by 1
notification templates. Employers’ August 2012, relating to the ELR and its associated records as at 1 April
Liability
2012 (with subsequent annual reassessment).
Maintenance and assurance over the ELR
Firms with relevant policies and claims must make their ELRs Requirements Auditors’ reports will be available to the insurer, the FSA and any
Tracing Office the insurer uses.
available, either on their website or using a qualifying tracing office
to host the register. Firms have three months from the date that a Notification to Audit reports
Subsequent Directors’ Certificates and audit reports following
policy is issued, renewed or a claim is made to include details of the
policy on their ELR.
the FSA the first 2012 year of reporting must be obtained at least annually
thereafter and submitted to the FSA no more than four months from
the effective audit date of the ELR.
Insurers must have appropriate systems and controls in place to
enable them to maintain their ELRs in accordance with the FSA’s rules.
The FSA have reiterated the importance of such governance and control Maintenance
through the updated ICOBs 8.4 rules and guidance, which require Directors to
make representations (via a Director’s Certificate) on the systems and controls used and assurance
in the production of the ELR. Where the Director’s Certificate cannot attest to this (due
to material non-compliance, errors or failures in the systems and controls), the Director’s Certificate should
over the ELR
provide relevant timescales for remediation.
The ELR must be accessible for tracing purposes (with restrictions around copying or downloading of information)
to reflect employers’ liability policies taken out, renewed or in respect of which a claim is received or is outstanding on
or after 1 April 2011.
4 5
4. Employers’ Liability Registers Employers’ Liability Registers
Transitional options for Key
questions/
The previous sections have highlighted several areas firms need to consider
in completing and producing an ELR that meets the FSA’s requirements.
To further assure these requirements are met, in preparing for such audits,
the audit report on ELR challenges there are several key questions that general insurance firms should be asking
themselves and should be able to answer. These include the following:
Are we confident in our understanding and adherence to the new FSA requirements around
The FSA has provided, in its updated ICOBS 8.4 rules (within Appendix the ELR?
TP1 on Transitional Provisions), two options for the first two years of
production of audit reports (i.e. from 1 April 2012 to 1 August 2014). Do we have the requisite skills and knowledge of employers’ liability requirements and their
practical application within our internal teams, or is external assistance required for compliance?
For audit reports produced for periods after 1 August 2014, there is just
one option.
Are we adequately mitigating the risks that our ELR is incomplete or inaccurately compiled
from underlying data through robust internal control systems and governance?
Year 1 (as at 1 April 2012)
Have we confidence that our records of policies and claims data within our internal systems are
fundamentally accurate and complete and have adequate granular detail?
Limited Assurance Audit Agreed-Upon-Procedures Audit
Auditors will be required to perform limited Transitional arrangements are available, for limited
assurance engagements. periods and subject to certain conditions, for auditors
Have we established strong governance and oversight over employers’ liability processes, particularly
to perform an agreed-upon-procedures (AUP) audit
OR
given that Directors’ representations (via a Director’s Certificate) are required by the FSA?
A limited assurance audit will provide an opinion that instead.
the auditor has found no reason to believe the firm is
not materially compliant with FSA rule requirements The transitional arrangements are only available until 1
Have we appropriately identified any in-scope reinsurance to close and excess polices where the
in production of its ELR. August 2012 (first year reporting) for all firms,
new FSA conditions for ELR inclusion are satisfied?
Such material compliance is in regard to the firm’s unless
extraction of information from its underlying records
and the firm’s management of risks or errors of the firm has been unable to issue an unqualified Have we engaged independent audit support and discussed the scope, timing and
omissions in the underlying records and presentation Director’s Certificate. Such firms will be permitted performance of the audit engagement to meet regulatory deadlines?
in the ELR. to use AUP audits until the earlier of i) the date upon
which the firm first obtains an unqualified Director’s
Certificate, or ii) 1 August 2014. Do we wish to make use of any FSA transitional measures (providing options for audit
approach) for the first year of regulatory audit reporting in 2012?
AUP engagements require more prescribed
procedures and sampling methodology, which the
FSA have specified, but with no opinion provided by Grant Thornton recognises that the first year of reporting in 2012 may prove to be the most
the auditor. This has been introduced to reflect the onerous and time-consuming for firms.
FSA’s acknowledgement of phased, transitional efforts
required for the industry to meet the new rules.
We are able to provide you with a team that is extensively experienced to deliver an efficient
and effective audit to meet the FSA challenges.
From 1 August 2014 onwards
Grant Thornton are able to provide an unparalleled service, underpinned by keen regulatory
insight and a commitment to strong and open client relationships, to help your firm
Limited Assurance audit engagements and reports only
overcome the challenges of the ELR audit.
6 7
