Striking the right balance
A proportionate approach to conduct risk in wholesale insurance markets
Conduct risk has traditionally been seen only as a concern for retailers of personal lines insurance. However, the Financial Conduct Authority has dramatically widened the focus of conduct risk to cover all firms in the supply chain and all consumers of general insurance – from personal lines, to commercial lines including large risks and reinsurance.
This expansion in scope has brought many more firms, lines of business and products into the focus of conduct risk. This includes firms – both brokers and underwriters – operating in the Lloyd’s and London market.
With limited focus on conduct risk until now, many firms in wholesale insurance markets have little precedent or guidance on how to appropriately deal with the challenging ‘grey areas’ when addressing conduct risk.
There is a real danger that firms address conduct risk disproportionately or without mitigating the actual risk. In this paper we explore these risks and offer an approach that firms can use to identify and mitigate conduct risk to drive commercial success.