Cunningham Lindsey UK

OutsourcingRegulationThe FSA Systems and Controls Sourcebook (3A.9.1)makes it clear that firms cannot contract out of theirregulatory obligations and must supervise the dischargeof any outsourcing, particularly if it is “Materialoutsourcing”. Claim handling is considered to bematerial outsourcing of a front office function and controlis needed.FSA guidance on material outsourcing broadly fallsunder the following headings:Cunningham Lindsey UK ResponseWith any material outsource, FSA require evidence ofthe procedure supporting the decision to outsource andthe criteria applied in selecting the outsourceprovider(s). In particular insurers are required to“conduct appropriate due diligence of the providersfinancial stability and expertise”. Only once this hurdlehas been cleared does it make sense to consider thedetails of the service contract and issues such asbusiness continuity and surge capacity.1) Pre-Contract Considerations• What impact will the outsourcing have on thebusiness and its risk profile• Ability to continue meeting regulatory obligationswhen outsourcing• Service provider’s financial stability1) Pre-Contract Considerations• We have a recognised reputation for ‘delivering ourpromises’, supported with industry awards• We are committed to fulfilling regulatory obligations onyour behalf• We have a sound financial track record and strongtrading position2) Contract with Service Provider - the FSA’sguidance here sets out the areas to consider innegotiating the contract such as:• Information ownership and confidentiality• Guarantees and indemnities• Approval process for making changes2) Contract with Service Provider - the contractualconsiderations set out by the FSA are generally in placeunder most of the contracts we have with major UKinsurers.• We have ISO 27001 registration for our informationsecurity management system• We have substantial PI and other insurance• We have fully documented processes and proceduresfor making changes6 Cunningham Lindsey UKOutsourcing 7