The PRA published Consultation Paper (CP12/15) “Senior Insurance Managers Regime: a streamlined approach for non-Solvency II firms” on 27 March 2015. The CP describes how the PRA is proposing to apply the new Senior Insurance Managers Regime (SIMR) to non-Solvency II firms.

This comes a few days after the publication of the first set of final rules that will be used to implement the SIMR for Solvency II insurers. Our recent blogs, summarising the scope and effect of the SIMR regime and the first set of final rules are available here and here.

The rules in the latest SIMR CP, will apply to the100 UK insurers that will be out of the scope of Solvency II (for example) because they’re small (they have assets of less than £25 million and an annual premium income of less than £5 million); or they’re in run-off and relying on Solvency II’s transitional measures. The CP describes these firms collectively as “non-Directive firms (NDFs)“. The PRA’s intention is to create a “streamlined SIMR for NDFs”, which, in conjunction with the Solvency-II SIMR, will replace the PRA’s current Approved Persons Regime for insurers.

Under the proposed regime:

  • NDFs will be required to seek approval for at least one individual who will hold and carry out the “single small insurer senior management function (SISMF)”. For NDFs, this new function – SISMF25 – will replace the director (CF1), non-executive director (CF2), CEO (CF3), director of unincorporated association (CF5) and small friendly society (CF6) functions;
  • The Solvency II fitness and propriety criteria will be applied to SISMFs – “NDFs would also be required to [(a)] conduct criminal records checks for new individuals they propose to appoint to the SISMF [and] [(b)] consider whether individuals in a [controlled function] discharge their roles in accordance with the PRA’s conduct standards, as part of an ongoing fit and proper assessment“;
  • Four particular responsibilities must be allocated to one or more SISMFs:
    • “business plan and management information;
    • financial resources;
    • legal and regulatory obligations; and
    • oversight of proportionate systems and controls, and risk management”; and
  • The same conduct standards will be applied to senior managers at NDFs as at Solvency II firms.

The new list of controlled functions “will have to be introduced from the commencement date of the relevant sections of the [Banking Reform Act] on 7 March 2016“. However, the PRA is proposing to grandfather across current controlled function without re-assessing them.

The CP includes:

  • A comparison of the proposed SIMR for NDFs with:
    • The current Approved Persons Regime; and
    • The fuller SIMR for Solvency II firms; A set of proposed conduct standards for senior insurance managers; and A set of proposed PRA Rulebook provisions relating to Non-Solvency II firms.

The FCA is consulting separately via FCA Consultation Paper CP15/15 “Changes to the Approved Persons Regime for insurers not subject to Solvency II” … which is beginning to make the new arrangements look like a boy band. It was bad enough when they were together. At least then, they developed their proposals together, and released them one at a time as a single (consultation paper) album. Since they split up, it’s been worse because they’re releasing solo albums all over the place, so it’s hard to keep up, and harder to avoid them, if that’s what you’d rather do. At least here, the two consultations were released on the same, and they’ll close together on 15 May 2015. If they’d been competing for the number 1 slot in the non-solvency II firms hit parade, that wouldn’t have happened, and it would be harder still.