Near-final rules for the extension of the Senior Managers & Certification Regime (SMCR) to all financial services firms, including insurers and insurance intermediaries, have been published today by the PRA and the FCA. The FCA has also confirmed that the extension of the SMCR to insurance intermediaries will take effect from 9 December 2019.
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.
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.
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).
The governance landscape for insurers continues to develop following the introduction of the Senior Insurance Managers Regime last year and PRA Supervisory Statement SS5/16 on Board Responsibilities. The Audit Directive, which applies to financial years beginning on or after 17 June 2016 (subject to transitional provisions), will affect the way in which insurers manage their audit arrangements, and in particular introduces independence requirements to most firms. The extension of the banking sector Senior Managers and Certification Regime (“SMCR”) to all authorised firms will also bring change to insurers’ compliance and governance processes. A consultation paper on the extension of the SMCR is expected in Q2 2017.
Our “at a glance” guide (which can be found here) provides a summary of recent developments in governance for insurance companies.
In November 2014, the PRA and the FCA proposed wide-ranging reforms of the Approved Persons Regime (APR) for insurers and reinsurers.
The PRA will introduce a Senior Insurance Managers Regime (SIMR), in line with its commitment to extend to insurers changes being made for banks. Outrage expressed about a lack of individual accountability has been more muted in the case of insurers than for banks. The underlying driver for change is, however, the same. It is considered unacceptable for senior managers within financial institutions to shirk responsibility when those institutions fail. The fast-approaching Solvency II start date was a further reason for the PRA and the FCA (together, the Regulators) to look again at the APR. Continue reading