On 13 June 2017, the Prudential Regulation Authority (PRA) published a consultation paper entitled Strengthening accountability in banking and insurance: optimisations to the SIMR and changes to SMR forms (CP8/17). Chapters 2 and 3 of CP8/17 are relevant to all Solvency II insurance firms and to large non-Directive firms (NDFs). The proposals for insurance firms are designed to bring the SIMR more closely into line with the Senior Managers Regime as the PRA moves to a more integrated regime.
In chapter 2 of CP8/17, the PRA sets out its proposed amendments and optimisations to the Senior Insurance Managers Regime (SIMR), which are designed to bring the SIMR more closely into line with the Senior Managers Regime (SMR) as the PRA moves to a more integrated regime.
The proposals are:
- To create a new Senior Insurance Management Function (SIMF) – the Chief Operations function (SIMF24) which would include the most senior individual(s) responsible for managing the internal operations and technology of a firm (the role can be split between these areas);
- To create a new Prescribed Responsibility (PR) for the firm’s performance of its obligations in respect of outsourced operational functions and activities;
- To create a new SIMF, the Head of Key Business Area function (SIMF6), for individuals who are responsible for large business areas or divisions within a firm – designed to bring within scope those individuals who are responsible for the management of business areas and divisions that are “sufficiently large and complex” (ie gross total assets equal or in excess of £10bn and accounts for more than 20% firm gross revenue) to have a potential impact upon the safety and soundness of these firms;
- To require that the Chairman function (SIMF9) and Chief Executive Officer function (SIMF1) roles may not be held by a single individual at ‘large firms’; and
- To require that a Non-Executive Director (NED) oversight SIMF role at a ‘large firm’ that is part of a group may not be performed by a group executive (an individual performing some executive function within that same group).
Chapter 3 of CP8/17 contains proposals to strengthen governance by requiring Solvency II insurers and large NDFs to have a policy to consider a broad set of qualities and competences when recruiting board members, and to have a policy to promote diversity among board members. This should help to promote a diverse board composition and consequently improve board effectiveness.
The consultation on the proposals in Chapters 2 and 3 closes on 22 September 2017.