In July 2018, the FCA and PRA published a series of papers on the extension of the SMCR to insurers. Those papers included: (a) the FCA’s “Senior Managers and Certification Regime: Guide for Insurers”; (b) the FCA’s Policy Statement and near final rules on “Extending the Senior Managers & Certification Regime to insurers”; and (c) the PRA’s Policy Statement on “Strengthening individual accountability in insurance: Extension of the SM&CR to insurers”.

Unfortunately, there are gaps and inconsistencies within the Guide, within the ‘covering text’ for the Policy Statement, and between that text and the near final rules. So it’s difficult to work out exactly what’s required by when.

It is clear, however, that insurers have a lot to do, and very little time in which to do it. This is because, in our experience:

  1. It’s sometimes surprisingly difficult to work out whether a particular individual is a Senior Manager or a Certification Function employee;  
  2. Some Senior Managers and Certification Function employees will want to lawfully avoid their new obligations, whilst others will try to take advantage of the promotion opportunities and “danger money” that might be on offer;
  3. Employment contract, appraisal form, staff handbook, job specification, and other documentation changes are often required;
  4. (Like so many things in life), the FCA’s Conduct Rules don’t always mean what they say, or say what they mean … and everyone needs to understand exactly what they mean, because a breach could have serious consequences for employer and employee alike;
  5. Many of those affected by the new referencing rules will regard them as “terrifying” (at first).

Insurers now have:

1. A few weeks to work out:

a. how they will manage / respond to the promotion and expansion of the compliance function, from a Key Function into a Senior Management Function; and/or from a function that’s primarily responsible for compliance with COBS, COLL and CASS, into a function that’s responsible for compliance with the whole of the FCA’s Handbook;
b. whether they have anyone who carries out the new Senior Management Functions SIMF6 (Head of Key Business Area function); SMF 18 (Other Overall Responsibility Function); and SIMF24 (the Chief Operations function);
c. what they need to do (if anything), to get every relevant individual approved to perform these function(s), from 10 December 2018 (a particular challenge, if they’re not Controlled Function or Senior Insurance Management Function holders today);
d. how they will allocate the 5 new prescribed responsibilities; and
e. what they need to do, to make sure:

i. every senior manager understands the new duty of responsibility; and
ii. those who will accept and be responsible for the 5 new prescribed responsibilities, have what they need to comply with their new obligations, from 10 December 2018;

2. Until 3 December 2018 to submit a Form K to transition and convert their existing Controlled Function Holders and Senior Insurance Managers into Senior Managers;

3. Until 10 December 2018, to:

a. Submit an agreed Statement of Responsibilities for every Senior Manager listed in the Form K;
b. Submit an entity-wide Management Responsibilities Map;
c. Train their Senior Managers and Certification Staff on the Conduct Rules, so that every relevant individual (A) properly understands his Conduct Rule obligations; and (B) can begin to comply with them, on / after that date; and
d. Prepare for the new Regulatory References Regime, so they can meet their obligations (A) when they want to hire a new Senior Manager or Certified Person; and (b) when they’re asked for a reference by another authorised firm that wants to hire a former employee;

4. Until 9 December 2019, to:

a. Certify every individual member of their Certification Staff population; and
b. Train almost every other member of staff (i.e. those who aren’t Senior Managers, members of the certification staff population, or ancillary staff) on the Conduct Rules;

Fox Williams has a dedicated team of regulatory, employment and HR experts, with a great deal of experience advising the banks on the implementation of the full SMCR; and insurers on the implementation of the SIMR. We are well placed to help you and your colleagues prepare for and meet the new requirements in the most efficient way possible.


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