The PRA has written to insurers to provide guidance on how to prepare for the implementation of the SIMR.
The final rules and guidance for the SIMR were published on 13 August 2015 and HFW will shortly be publishing a detailed briefing on the new regime.
The PRA’s letter on the implementation of the SIMR1 states that:
- All insurers will need to identify the individuals that are performing certain functions. They will either need to transfer (or ‘grandfather’) the individuals who are currently approved under the approved persons regime to the equivalent function in the SIMR by 8 February 2016, or make a new application for approval of the relevant individuals after 1 January 2016.
- The SIMR is a natural extension of Solvency II, which introduces the concept of “key function holders”. These are functions which could potentially lead to significant losses being incurred, or to a failure in the ongoing ability of the firm to meet its obligations to policyholders, if the functions are not properly managed and overseen. Examples of key functions which must be covered by an insurer’s system of governance are:
- Risk management
- Internal audit
...although the PRA has stated that this should not be considered an exhaustive list.
- Solvency II firms will need to notify the PRA of their key function holders as at 1 January 2016. Ongoing assessment of the fit and proper status of these key function holders is then required.
- Firms which are not subject to Solvency II pose different risks to the PRA’s objectives compared with Solvency II firms, so a streamlined version of the SIMR is being developed for these firms. The PRA is currently consulting on the regime for non-Solvency II firms in consultation papers CP26/152 and CP27/153.