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For firms that have already embedded the Senior Insurance Managers Regime (SIMR), the Senior Managers & Certification Regime (SM&CR) may seem like an evolution rather than a revolution. But there are areas of change which are important to review before the regulation goes live in your sector.
With SM&CR due to come into force for insurers on 10 December 2018, the clock is ticking down to the deadline. Firms should be getting confident with the progress on embedding the regulation across their organisation. However, if you feel your insurance firm is underprepared, here are some basics that you can quickly get underway before the deadline. Even if you are confident about your preparations, it might be worth double-checking that you’ve done all of these.
Test how robust your governance framework is
All firms will have to create and maintain statements of responsibility for each of their senior managers, and some firms will also have to create and maintain a management responsibilities map, which are the new names for the scope of responsibilities and the governance maps that were part of the SIMR implementation. Either way, it’s important to be able to show how your firm is governed, who is responsible for what aspect of governance, and how the various entities and responsibilities relate to one another. Your governance framework should be well documented and fully embedded.
Identify who within your firm will be subject to the Certification Regime
Whilst the Senior Manager Regime is conceptually fairly similar to SIMR, the Certification Regime will be new to insurers. You are going to need to identify those individuals who are not senior managers, but their roles mean they pose (or may pose) a risk of significant harm to the firm. Once you have identified this population of individuals, you will need to put a robust and clearly documented processes in place to assess and certify these individuals as fit and proper to perform their roles, on at least an annual basis. The certification regime has proved to be extremely difficult to properly implement, for firms in the banking sector.
Identify who within your firm will be subject to the SM&CR conduct rules
On top of the requirement for people carrying out SMFs and certification regime roles to be subject to specific conduct rules, a much wider group of employees will now be subject to PRA and FCA standards via the general conduct rules. This group will, in fact, include your entire workforce except for those individuals deemed to be in ancillary roles. The main challenge your firm faces here is to make the high-level principles real for all the staff concerned. You will also need to create role-based metrics against which to measure each individual in the group. Firms could take this as an opportunity to reflect on what conduct actually means to their organisation and then review their current conduct risk framework to see if this is reflected.
Assess the changes needed to move from SIMR to SM&CR
Make sure you have identified the key differences between SM&CR requirements and SIMR as implemented in your firm, and that you know what changes are required to comply with the new regime. Some differences are largely a matter of terminology: Senior Insurance Management Functions (SIMFs) will become Senior Management Functions (SMFs), for instance. But other changes are more significant – for example, SM&CR introduces additional SMFs that didn’t have counterparts in SIMR, together with a Duty of Responsibility for SMFs.
List competences needed to comply with SM&CR and plan ongoing training
Once you’ve established which competences you need, have a clear plan for how this training will be provided – and documented – on an ongoing basis. This applies particularly to the roles that come under the new certification regime: the FCA has identified “functions subject to qualification requirements”, such as individuals “advising on long-term care insurance contracts”. You need to be able to show that such individuals have the competences necessary to do their job, now and in the future. Firms will need to consider the appropriate ongoing validation they need to be satisfied their people know what they’re doing.
Show you have the wheels in motion
If you need extra help, please remember that Bovill has extensive experience in helping clients implement regulatory regimes under time pressure, and so is well equipped to work with you to prioritise and carry out outstanding work. We can contribute in whatever way suits you best, from “kicking the tyres” of your implementation to make sure you’ve successfully embedded SM&CR to carrying out some of the tasks needed to get over the line by 10 December, and support you in developing a future governance framework that fits the needs of your firm, your customers and the regulatory requirements.
Please get in touch to find out more.
