Insurers have become accustomed to ever increasing levels of regulatory oversight and supervision over the past few years including, in 2017, the introduction of the Senior Insurance Manager's Regime (SIMR) which currently applies to:
- Insurers and reinsurers
- Insurance Special Purpose Vehicles (ISPVs)
- The Society of Lloyd’s
- Managing agents
- UK branches of third-country firms and European Economic Area (EEA) firms
- Approved Persons within those firms
For a full update on SIMR please click here.
The FCA has announced that from 2018 onwards it intends to apply a regulatory regime to all firms authorised under the Financial Services and Markets Act 2000. This means that MGAs, brokers and other insurance intermediaries and their senior employees will be required to comply with the extended Senior Managers Regime, which is likely to include:
- Governance maps
- Prescribed responsibility for senior managers, other holding 'key functions' and NEDs
- Ongoing fitness and propriety assessments
- Compliance with FCA conduct rules
Any business conducting regulated activities such as dealing, arranging deals, making arrangements with a view to a contract, assisting in the administration and performance and advising on contracts of insurance will be regulated under the extended regime.
The FCA has stated that the aim of the new rules is to "Enhance and embed a culture of accountability" and to put an "increased focus on smaller numbers of senior functions, supported by responsibility maps".
The consultation paper is expected to be issued by the FCA by the end of June 2017 and a FCA policy statement is also expected around that time.
What can you do now to plan ahead?
- Identify your organisation's governance structure: check who is responsible for what at the most senior levels of your business.Do their job descriptions match this? Do they need updating? Knowing what your senior staff are doing now will help to you to identify and map responsibilities when the regulatory regime is implemented.
- Agree who will be responsible for implementing the new regulatory regime. What involvement will your HR, legal and compliance functions have?
- Liaise with HR to build the strands of the new regime (such as Statements of Responsibility, assessment of fitness and propriety and conduct and provision of regulatory references) into the employee lifecycle so that they are taking into consideration on recruitment, training, promotion, appraisal and dismissal.
- Make staff aware of what is on the horizon and ensure that senior staff members understand that the new regime involves taking personal responsibility for compliance.
- Start to embed compliance with the conduct rules across all levels of your business and consider including it in onboarding/induction of new staff.
- Consider what training your senior managers, compliance, HR or legal may need.
- Review your recording and reporting systems to ensure that when managers address disciplinary issues, the relevant records are recorded appropriately as they may need to be reported either to the FCA or reflected in a regulatory reference.