Regulators consult on Senior Manager and Approved Persons Regime for insurers: PRA and FCA are each consulting on proposals for changes to individual accountability for insurers.

  • PRA is consulting on a Senior Insurance Managers Regime (SIMR), which will apply to the Chief Executive, Finance, Risk and Underwriting Officers of insurers, the Head of Internal Audit, the Chief and With-Profits Actuary, and, for Lloyd's, the Underwriting Risk Oversight Function. It also introduces new key functions for a Group Entity Senior Insurance Management Function and, for third country branches, the Third Country Branch Manager function. The proposals stem in part from requirements in Solvency 2 and are similar to, but not the same as, the regime for the banking sector. The criminal sanctions and the "presumption of responsibility" that are features of the banking senior manager regime will not be part of the SIMR. The proposals will require each holder of a "senior insurance management function" to be approved by PRA. Its rules will set out how firms must ensure individuals who carry out key functions are fit and proper at all times, and how they must allocate prescribed responsibilities within their businesses. PRA also proposes a set of conduct standards for any individual within a relevant firm who is a person performing a "key function". PRA's paper and proposed new rules are accompanied by a draft supervisory statement;
  • FCA is proposing to amend its Approved Persons framework in line with Solvency 2 and also:
    • to make into FCA Significant Influence Functions (SIFs) those executive and certain other controlled functions which PRA is proposing not to maintain;
    • to consider (but not yet) whether to include Non-Executive Directors (NEDs) within the amended Approved Persons Regime for Solvency 2 firms, dependent on its decision on how to deal with NEDs in banks;
    • to apply to FCA and PRA approved persons new FCA Conduct Rules mirroring those FCA has already proposed for individuals within relevant authorised firms for Banking Reform Act purposes. 

FCA's consultation includes an annex showing how the new proposed activities map from the current controlled functions, and proposed changes to the Handbook including to the Code of Conduct sourcebook (C-CON), which itself is still in draft.

Both consultations close on 2 February 2015. (Source: PRA Consults on SIMR and FCA Consults on Approved Persons in Insurers)

PRA consults on rule changes: PRA is consulting on redrafting certain parts of the rules it inherited from the Financial Services Authority in the second consultation towards creating its own rulebook in its own style. This consultation covers:

  • draft rules on status disclosure, controllers, close links, notifications and systems and controls;
  • draft supervisory statements on:
    • aggregation of holdings for the purpose of the prudential assessment of controllers;
    • internal governance of firms;
    • exercising functions under the Building Societies Act 1986; and
    • the treasury and lending activities of building societies; and
  • a statement of policy on insurance business transfers.

The consultation also includes a rulebook mapping table to compare the new proposals with the current location of the relevant rules. PRA asks for comment by 23 January 2015. (Source: PRA Consults on Rule Changes)

PRA consults further on Solvency 2: PRA is consulting on further measures for the implementation of Solvency 2. This paper covers:

  • rules on appointment of actuaries and schemes of operations;
  • templates and minor consequential changes to reporting relevant to Lloyd's; and
  • supervisory statements setting out PRA's expectations on reporting exemptions, reporting of internal model outputs, considering the ultimate time horizon when non-life firms develop their Own Risk and Solvency Assessments, quality of capital instruments and treatment of pension scheme risk.

The consultation closes on 30 January 2015 and PRA aims to publish all its Solvency 2 final rules and guidance in Q1 2015. PRA has also published a Solvency 2 Directors' update letter, which covers CP24/14 and links new information on how to support pre-applications for using matching adjustment. (Source: PRA Consultation on Further Measures to Implement Solvency 2)