Background to the proposed changes
The FCA and the PRA launched separate consultations on the extension of the SM&CR to insurers in July 2017. Our summary of the key changes that the regime will bring can be found on our previous article 'Senior Managers’ Regime for insurers – what you need to know'.
In December last year, the FCA and PRA released further consultation papers detailing the proposed transitional arrangements and timelines for implementing the new regime.
The FCA and PRA are expected to publish their respective policy statements and final rules this summer. We now know that these rules will come into force for insurers on 10 December 2018 according to the Treasury's press release.
What should insurers be doing now?
Whilst the requirement for insurers to certify relevant individuals as fit and proper under the extended SM&CR regime will not apply until 12 months after the initial commencement date, i.e. 10 December 2019, it is certainly not too early to start preparing for implementation. This is not least because the Conduct Rules will apply to these individuals from 10 December this year, so firms will need to have identified and trained such staff by this date.
We recommend that firms assemble their project teams and start work on the various implementation actions as soon as possible. This should include:
- mapping across all existing Senior Insurance Management Functions (SIMFs) and Significant Influence Functions (SIFs) into the new Senior Management Functions (SMFs), and ensuring all prescribed responsibilities (including the new ones) are appropriately allocated;
- reviewing existing scope of responsibility documents and governance maps, and converting them into ‘statement of responsibility’ documents and ‘management responsibility maps’. This is a particularly important exercise as these documents will need to be submitted to the FCA as part of the “Form K” conversion notification for all FCA SMFs;
- rolling-out training, initially for all SMFs and Certification Staff, but in due course for all staff who will become subject to personal regulatory duties under the extended regime; and
- updating your policies and procedures to reflect the requirements of the regime, and amending your employment contracts.
BLP have substantial experience advising firms in the banking sector on preparation for, and implementation of, the SM&CR and can draw on this experience, together with our knowledge working for insurers, to guide you through this complex process. We would be very happy to meet with your project team to discuss in more detail the steps you need to take.