Impact of Senior Insurance Managers Regime (SIMR) on Firms

Governance, risk & compliance
FCA, Life insurance, Mutuals, Non-Life, PRA / Bank of England, SIMR, Solvency II

07 September 2016

The Senior Insurance Managers Regime (SIMR) is being introduced to insurance companies throughout the period 1st January 2016 to March 2017. The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have set out differing requirements depending upon what type of insurance company they have classified you as. There are three categories of insurance company affected and these are:

  • Solvency II firms (i.e. insurers subject to the Solvency II Directive)
  • Large non Directive firms (i.e. insurers not subject to the Solvency II Directive but who have assets in excess of £25 million.)
  • Small non Directive firms (i.e. insurers not subject to the Solvency II Directive but who have assets of £25million or less.)

Whilst the regulatory requirements differ between category of firm, one constant is that all people in the firm, who are key function holders, have the same personal responsibility for the role and activities prescribed to them. These will be a mixture of conduct standards, prescribed responsibilities and duties allocated by the firm. For the first time individuals will now be signing a Scope of Responsibility Statement to accept personal responsibility and liability for discharging their duties to high standards.

Impact on Compliance Management

The overarching responsibility for ensuring the SIMR is implemented successfully on a day to day basis will usually rest with the Compliance function, although it touches many other departments as well. We believe the Compliance function will have the following primary responsibilities:

  • Overarching responsibility for successful implementation and ongoing management of the SIMR across the business by way of approved Policies, Processes and Procedures.
  • Giving approval that a function holder is fit, proper and competent at the time of assuming prescribed responsibilities and an ongoing basis thereafter. This will be especially relevant at the point of submitting a request for approval to the regulator or certifying fit, proper and competent annually.
  • Ensuring that the Governance Map is maintained at all times and that record keeping meets the regulatory standards.

Impact on Board Members and other approved persons

In our view the following are important matters that the Board Members and approved persons should consider:

  • Ensure they fully understand the content of your Scope of Responsibility Statement and are satisfied that they will be able to discharge their responsibilities.
  • Understand that if they are a non-executive director, then certain Senior Insurance Manager Functions may move them nearer to having executive type responsibilities. How will they get themselves much closer to the necessary detail?
  • The regulation expects them to take all "reasonable steps" to discharge their responsibilities properly. How will they maintain, over a long period of time, a personal record to ensure they have taken all "reasonable steps"?

It will be important for each person caught within the SIMR to satisfy themselves that they can deliver their responsibilities, rather than assuming that the organisation they are part of will make it happen on their behalf.

Impact on People Management

All firms will need to establish the competency of the people who run the business on an ongoing basis. These people are responsible for delivering the key functions they fulfil to high standards of competence and conduct.

SIMR makes it more important than ever to install professional standards of people management and to keep comprehensive evidential records of how this has been done. The regime also makes function holders personally accountable for their responsibilities and they should be as eager as Human Resource professionals to be able to prove that they have taken all reasonable steps to fulfil their duties to the expected standards.

Inherent in achieving the standards will be:

  • Professionally conducted Training Needs Assessments linked to Individual Scope of Responsibility Statements.
  • Delivery of high quality Continuous Professional Development (CPD) training and education.
  • Robust performance assessment of function holders both at the personal level and as part of a group (i.e. a Board or Committee).
  • First class documentation of all of the above and safe and secure long term record keeping of it.

Whilst day to day delivery of these processes is likely to rest with specialists within the firm, the personal accountability for the delivery of fit, proper and competent, because it is a "prescribed responsibility", will most likely rest with the Chairman (for Board members) and the Chief Executive Officer (for full-time staff).

How can OAC help you with the SIMR?

Whatever size of business, whether you have internal resource or not, OAC can help firms meet the regulatory requirements through consultancy support and by using its bespoke SIMR software solution TRAC10. Both approaches, alone or together, offer a highly cost effective way of meeting this new and already demanding regime which will be further strengthened in 2018.

Claire Lightwood FIA

For more information
Claire Lightwood FIA
Professional Services, Account Manager

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