Insurers given Senior Managers & Certification Regime dealine

HM Treasury has announced the date by which insurers must comply with the Senior Managers & Certification Regime (SM&CR) – and the deadline is less than a year away.


Last month, the Treasury said the SM&CR would apply to various insurance-related organisations from December 10th 2018. This is the first step in a long-term rollout campaign that will eventually see all firms that are regulated by the Financial Conduct Authority (FCA) brought under the regime.


The SM&CR was originally introduced in March 2016 for banks and Prudential Regulation Authority (PRA) regulated investment businesses. The regime aims to prevent corporate wrongdoing by giving more accountability to senior employees within an organisation.


Economic secretary to the Treasury John Glen said the UK’s regulatory environment is one of the key reasons why the country is such an attractive location for financial services investment.


“The SM&CR plays a big part in this, ensuring that those at the top display the behaviours and values that the British people expect,” he stated.

“The extension of the regime to insurance firms will ensure individual accountability for misconduct at the most senior levels within the insurance sector.”



Which insurers are affected?

The SM&CR will apply to all FCA-regulated insurers, which includes:

  • Insurers and reinsurers;
  • Managing agents;
  • Insurance special purpose vehicles;
  • UK branches of third-country firms and EEA businesses; and
  • The Society of Lloyds.

The Senior Insurance Managers Regime (SIMR) and the Revised Approved Persons Regime will be replaced with the three SM&CR components: the Senior Managers Regime, the Certification Regime and Conduct Rules.


Each section has specific obligations with which insurers must comply by the deadline. Here are some of the key aspects of the regime:

Senior Managers Regime (SMR)

Under the SMR, the most senior people performing key roles at insurance firms must have approval from the FCA or PRA before they can begin their job.

These ‘senior managers’ must have a statement of responsibilities that clearly outlines the areas of the business where they are ultimately accountable. Insurers already operating under the SIMR may recognise this as similar to the existing ‘scope of responsibilities’ document, which will be replaced.


Organisations must also confirm that appointed senior managers are certified as being suitable for their job at least once a year.



Certification Regime

The proposed Certification Regime applies to employees who are not senior managers, but who still hold positions within the business that could cause significant harm if they were to act irresponsibly.


These workers do not need FCA or PRA approval, although businesses must certify they are fit and proper for their roles once a year, much like senior managers.


Both the FCA and PRA handbooks provide more information on certification roles and firms’ responsibilities in this area.

Conduct Rules

The Conduct Rules are a set of guidelines designed to encourage high standards of behaviour among financial services employees.


“Some Conduct Rules apply to all employees, while others only apply to senior managers,” the FCA states.


“By applying the Conduct Rules to a broad range of staff we aim to improve individual accountability and awareness of conduct issues across firms.”


The Financial Services and Market Authority requires businesses to train their staff on Conduct Rules, with the FCA needing to be notified of any breaches that result in disciplinary action.

Is your firm ready to comply?

There is a certain amount of crossover between the SM&CR and existing rules with which insurers are already complying.


Nevertheless, firms will still need to make a number of changes over the coming months in order to meet their new obligations under the new regime. This comes at a time when organisations in the industry are already facing an increasing burden from MiFID II, the GDPR and other regulations.


As such, if your business needs help strengthening its risk and compliance teams in 2018 and beyond, please contact Barclay Simpson to find out how we can help.