The UK Senior Managers and Certification Regime (SMCR) is being extended to all financial services firms during 2018. PRA and FCA proposals applying to insurers build on the Senior Insurance Managers Regime (SIMR) although the transition to the SMCR is complicated by overlapping Solvency II requirements.
We have prepared a guide for insurers to the proposals set out in PRA CP14/7 and FCA CP17/26 (please click here for a copy).
Our experience of working with clients on the SMCR and the SIMR suggests that implementation projects should begin now rather than waiting for the outcome of the consultations.
On 14 September 2017, the UK Parliament published a letter from Nicky Morgan, Chair of the Treasury Committee, to Philip Hammond, Chancellor of the Exchequer, on insurers’ ability, post-Brexit, to service insurance contracts sold under passporting arrangements with a duration that extends beyond 29 March 2019.
The European Union (Withdrawal) Bill was published by the Government in July 2017 and is the key piece of UK domestic legislation that will implement Brexit.
Repeal of the European Communities Act:
The principal purpose of the Bill is to repeal the European Communities Act 1972, which gives effect and priority to EU law in the UK, thereby formally reasserting the sovereignty and independence of domestic law. The Government had published a White Paper in March 2017, Legislating for the United Kingdom’s withdrawal from the European Union (the “White Paper“) proposing a “Great Repeal Bill”. The now less dramatically titled European Union (Withdrawal) Bill (the “Withdrawal Bill“) is the vehicle for that legislation. The Government has also published detailed draft explanatory notes for the Bill (“Explanatory Notes“).
The FCA has published proposals to extend the Senior Managers and Certification Regime (SMCR), which already applies to banks, to other financial services firms. The new rules, which are designed to make individuals more accountable for their actions, will affect insurance intermediaries and their employees.
We have prepared:
- a two page “at a glance” guide (click here) to the FCA’s proposals; and
- a more detailed briefing (click here) which considers the implications for insurance intermediaries and their employees of the FCA’s proposals.
Recent comments made by Sam Woods, CEO of the PRA, about the PRA’s approach to supervision are worrying. A speech prepared for this year’s Building Societies Annual Conference (but not actually delivered) is relevant to all authorised firms, not just building societies. Parts of the speech, which relate to Solvency II rules on contract boundaries, are specifically directed at insurers.
- The PRA argues that is not enough for firms to meet the requirements of the regulatory regime; they must also comply with the “spirit” of the rules.
- The PRA will form its own judgement about what this means for firms, despite the UK’s obligations under EU law.
- Mr Woods’ failure to acknowledge EU constraints on the content of the applicable rules, and therefore the PRA’s use of its supervisory powers, appears to confirm that the PRA is willing to “gold-plate” EU legislation despite saying on many occasions that it would not.
In May 2017, the FCA published a guidance consultation paper (GC17/5) entitled “Proposed guidance on the FCA’s approach to the review of Part VII insurance business transfers”. The draft guidance in this document sets out the FCA’s approach to reviewing insurance business transfer schemes under Part VII of the Financial Services and Markets Act 2000 (FSMA) (Part VII Transfers). Continue reading
The European Insurance and Occupational Pensions Authority (EIOPA) has published an opinion on supervisory convergence in light of the UK withdrawing from the EU. Continue reading
With effect from 26 June 2017, Hong Kong’s independent Insurance Authority (“IA”) assumed its regulatory responsibilities and replaced the Office of the Commissioner of Insurance (“OCI”) in regulating insurers. The IA will be a much more powerful regulator than its predecessor, with enhanced authorisation and supervisory powers, as well as inspection, investigation and disciplinary powers over insurers.
The PRA has published a consultation paper (CP8/17), which includes proposed amendments and optimisations to the Senior Insurance Managers Regime (SIMR). It also includes a proposal to strengthen governance through requiring insurers to take steps to encourage board diversity. This CP is relevant to all Solvency II insurance firms (i.e. UK Solvency II firms, the Society of Lloyd’s and Lloyd’s managing agents, and third country (re)insurance branches), and to large non-Directive firms (large NDFs).
In Peel Port Shareholder Finance Co Ltd v Dornoch Ltd  EWHC 876 (TCC), Peel Port Shareholder Finance Co Ltd (Peel Port) applied for pre-action disclosure of the defendant’s insurance policy under Civil Procedure Rule 31.16. Peel Port was not able to rely on the provisions in Third Party (Rights against Insurers) Act 2010 because the defendant was not insolvent. Peel Port argued that it was highly probable that rights against insurers would be transferred to them under the 2010 Act in due course. They argued, therefore, that the court should exercise its discretion to grant disclosure of the defendant’s insurance policy at this stage to help avoid litigation and wasted costs. Mrs Justice Jefford refused to exercise her discretion to grant disclosure in anticipation of such a transfer of rights.