Senior insurers and brokers will soon have the same duty of responsibility as bankers under new legislation currently progressing through the House of Lords.
The changes mean that senior insurance managers and insurers will be subject to higher standards of personal responsibility and accountability. Around 580 insurance firms and 3,400 insurance managers are likely to be affected by the reforms, which are being introduced by the Bank of England and Financial Services Bill. The Bill1 widens the scope of the Senior Managers and Certification Regime to cover the whole financial services industry, replacing the existing Approved Persons Regime, which has been discredited since the financial crisis. The FCA commented that the Bill “is an important step in embedding a culture of personal responsibility throughout the financial services industry”.
The government had initially planned to introduce a “guilty until proven innocent” principle for senior executives, where the onus would be on the individual to prove they were unaware of any wrongdoing. This has been abandoned in favour of the duty of responsibility.
Following the Bill’s second reading in the House of Lords on 26 October 2015, the Bill has been committed to a Committee of the House of Lords. The new rules are expected to come into force on 7 March 2016 for banks, building societies, credit unions and PRA-regulated investment firms. It is expected to be extended to the insurance sector by 2018. In view of the timescale for implementation, insurance firms should start to think about identifying the individuals and entities who will be affected by the new rules, and establishing internal structures and systems necessary for compliance with them.