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Operational Resilience – Regulators Raise the Bar for Crisis Response

February 22, 2021 | Insurance Post

Justin Davies, head of Europe, the Middle East and Africa at Xceedance, spoke with Insurance Post, emphasizing how the industry will have certainly learned lessons from Covid-19.

After drawn-out consultations, financial regulators will soon lay out what they expect from firms, including insurance organizations, in terms of operational resilience.

Under new operational resilience rules, companies will be expected to set parameters for the maximum disruption their most important services can withstand and put in place contingencies to ensure they are able to respond within those parameters should a crisis arise.

The regulation has its origin in a string of high-profile disruptions that became the focus of a Treasury Select Committee inquiry.

One such incident was the TSB IT migration failure, which left up to 1.9 million of the bank’s customers unable to bank online in April 2018, in some cases for several weeks.

Both the FCA and the Prudential Regulation Authority published discussion papers in 2018, and in December 2019 the regulators launched consultations on the prospective regulations.

Those had been due to run until the spring of last year, but amid the disruption caused by the Covid-19 pandemic, the consultation period was expected until October.

According to Insurance Post, organizations are now awaiting a policy statement from regulators, with the implementation of the new rules likely to follow in the first half of next year.

While the final form of the regulations are yet to be unveiled, many firms are taking their lead from the consultation papers to steal a march on coming into line with the requirements.

Covid-19: Proving the Need for Resilience Planning

Though the pandemic may have prolonged the consultations paving the way for operational resilience, it may also have secured greater buy-in for the work firms are now faced with.

“Covid wasn’t a classic black swan event. There have been pandemics before, so it should not have caught the industry totally unawares,” Justin Davies, head of EMEA at Xceedance, says.

“Most firms have a business continuity plan, and some may have considered the possibility of enforced work-from-home circumstances. But few would have actually planned for such conditions to persist for a long period of time.”

“When it comes to resilience preparation, I’m sure Covid has taught the insurance industry to widen the scope of adverse impacts on the business, and to think more carefully about the kind of unknowable and indefinite scenarios for which they need to prepare.”

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