Insurance Europe has today published its views on a discussion paper by the Financial Stability Board (FSB) on regulatory and supervisory issues relating to outsourcing and third-party relationships.
Insurance Europe highlighted the need for additional clarity about regulatory requirements for users of third-party services, adding that it is important to avoid imposing unduly burdensome regulatory requirements on either the users or providers of such services.
Rather, a well-balanced approach is needed that allows financial institutions to benefit from third-party services, such as cloud computing, while also ensuring that risks are identified and appropriately managed.
Insurers also face a number of challenges related to outsourcing. Providers often leave very little room for insurers to negotiate contract terms, and insurers are often faced with insufficient notice to assess changes that providers make to terms and conditions. Moreover, there is a lack of providers on the market, which can lead to concentration risks.