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Senior Insurance Managers Regime

In addition to the new Approved Persons Regime for Solvency II, firms are now faced with also tackling the Senior Insurance Managers Regime.  With consultation periods on both initiatives coming to a close for insurers, many firms should now be starting to take stock about how the changes might impact their compliance and regulatory functions.  Whilst further elaboration is required to make both sets of rules operational, the expectation is that the requirements you will need to undertake are likely to land on a desk near you some time over the next few months and you may be forward planning already.

Approved Persons for Solvency II applies to all firms implementing Solvency II.  The EIOPA guidance published last year is designed to help local regulators ensure that key SII functions are governed by fit and proper individuals and gives them greater freedom to apply relevant conduct rules should that not be the case.  The regulator’s vision is to bring these rules in line with the new Senior Managers Regime for Banking in order to deliver consistent standards of conduct across the financial services sector. 

The proposed Senior Insurance Managers Regime is consistent with changes to the APR for Solvency II and sets out some significant and time consuming requirements for firms.  The most major changes in our view are linked; the creation of a Governance Map which gives a snap shot of key regulated responsibilities and reporting lines; the allocation of regulated responsibilities for Key Function Holders and how any changes in responsibility most be communicated to the regulator; and finally the prescription and communication to senior managers of core responsibilities such as the ORSA, Conduct, Culture and Standards.

To look to banking for guidance as to how these changes can be implemented seems to be a sensible move for insurance firms.  Our network of interim management contacts currently working with banks to make the necessary changes have outlined the following areas as a focus,

-       Striking the right balance for Governance structures can be a political minefield.  A central tenet of the new regime is individual accountability and so in most firms, where collective decision making is the norm, issues may arise where the individual is unwilling to compromise due to their personal exposure to the regulation.

-       Drawing up the Governance Map needs to be constructed diligently and must be meticulously maintained and altered over time as management structures evolve.

-       The difficulty in hiring for CF roles is likely to increase with the regulator more able to take negative action against these individuals.  Salaries may increase further still in line with the individual’s specific exposure.

-       The creation of new job descriptions, roles and responsibilities is leading to major headaches across HR Departments.

-       New roles will need to be created in some sectors – for example the Underwriting Risk Oversight Officer SIMF23 position.

As the UK’s leading provider of Governance, Risk and Compliance talent to the insurance sector, FourthLine is speaking to many of our customers about looking to skilled interim banking compliance professionals who can bridge the interim gap and help insurers get the tone right by navigating the new regime and establishing and embedding an appropriate framework that ties in the Executive, SII programme and Compliance and Human Resources Departments.