Strengthening individual accountability in insurance: extension of the Senior Managers and Certification Regime to insurers

Published on 26 July 2017


In this consultation paper (CP), the Prudential Regulation Authority (PRA) sets out its substantive proposals for the extension to all insurers of the Senior Managers & Certification Regime (SM&CR, ‘the regime’), that will be introduced by amendments to Financial Services and Markets Act 2000 (FSMA) through the Bank of England and Financial Services Act 2016 (‘the 2016 Act’).

A key objective for the proposals in this paper is to strengthen the PRA's regulatory regime for insurers to ensure there is an effective governance system with a clear allocation of responsibilities within firms; as well as to ensure the individual accountability of senior managers and directors for:

  • their own conduct in relation to their responsibilities within their firm;
  • overseeing the business conduct of the key individuals reporting to them (including in respect of the business risks taken or managed by these individuals); and
  • the ongoing safety and soundness of their firms, and the adequate protection of the firm’s policyholders.

In addition, the regime is intended to facilitate the recommendations in the Fair and Effective Markets Review (FEMR) by contributing to the fair and effective operation of markets.

The proposals are also intended to align more closely the individual SM&CR accountability regimes for banking and insurance, while continuing to respect the different business models in the two sectors, as well as the requirements of EU legislation.

Chapter 2 of this CP sets out the PRA’s proposals to extend the SM&CR to Solvency II insurers (ie UK Solvency II firms, the Society of Lloyd’s and Lloyd’s managing agents, and third country (re)insurance branches), insurance special purpose vehicles (ISPVs) and large non-Directive firms (NDFs).
Chapter 3 of this CP sets out the PRA’s proposals to extend the SM&CR to small NDFs. It is relevant to small NDFs (which are defined as insurance firms that are out of scope of Solvency II, and are not large NDFs).

This CP should be read in conjunction with Financial Conduct Authority CP17/26 (see External Links) which contains the FCA’s equivalent proposals for insurers to implement a complementary SM&CR.

Responses and next steps

This consultation closed on Friday 3 November 2017.

The PRA proposes to publish final rules in a policy statement during 2018. The extended SM&CR for insurers will not come into effect until a commencement date has been set by HM Treasury for the relevant amendments to FSMA in the 2016 Act.

The PRA intends to issue a further CP in 2017 Q3/Q4 that would contain proposals for aligning some of the terminology more closely with the current SM&CR for banking firms, and for updating the forms that enable the application of the SM&CR to both insurance and banking firms. The CP will also include proposals for the relevant transitional measures for the commencement of the new regime. A separate consultation on other consequential changes to the rules may follow in 2018 Q1.

PDFConsultation Paper 14/17

PDFPress release