What does the FCA's three-pillar framework primarily assess in a London Market broker?

The FCA's three-pillar framework focuses on the assessment of financial stability within financial institutions, including London Market brokers. This framework is designed to ensure that firms maintain adequate capital to withstand financial stresses and to promote confidence in the financial system as a whole.

When assessing financial stability, the FCA evaluates various aspects of a broker's operations, including their ability to manage risks effectively and their resilience in the face of market fluctuations. This involves examining the capital adequacy and the adequacy of risk management practices in place. The emphasis on financial stability ensures that brokers can continue to meet their obligations to clients and maintain overall market confidence.

In contrast, while operational risk management, market reputation, and regulatory compliance are all important factors within the insurance industry, they are not the primary focus of the FCA’s three-pillar framework. Instead, those aspects are typically covered through separate regulatory assessments and best practices that aim to ensure a comprehensive approach to risk management and operational efficiency in the market.