13 December 2018

In what the FCA described as a regulatory 'milestone', on 10 December 2018 the Senior Managers and Certification Regime came into force for all insurance firms.

This is the latest step on the FCA's journey towards an improved culture of individual accountability and responsibility and it is this that underpins the new regime. SMCR replaces the Senior Insurance Managers Regime and revised Approved Persons regime for this sector, and now aligns them more closely with the individual accountability regime in the banking sector, which came into force in March 2016.

Senior Managers regime

Many firms will have already taken steps to ensure compliance with the regime by 10 December 2018. These will have included:

  • identifying Senior Managers under the regime and attributing Senior Management Functions
  • converting and transitioning existing Controlled Function holders and Senior Insurance Managers into Senior Managers
  • allocating Prescribed Responsibilities
  • getting to grips with the new regulatory references regime

Certification regime

The Certification regime will be new to insurers and as such may be more challenging to deal with. The regime places responsibility squarely on firms to identify individuals who could pose a risk of significant harm to the firm, and to assess and certify them as fit and proper to carry out their role. 

These certifications must be completed before 9 December 2019 so firms should start preparing to make these assessments in good time in 2019.

Conduct rules

Virtually all staff will need to be trained on the new conduct rules, which will bring many individuals working in financial services organisations within the scope of regulatory supervision for the first time. These rules make it clear to all staff that proper conduct and accountability are the responsibility of everyone in the firm. The FCA has constantly stressed the importance of these rules in setting 'clear expectations for the conduct of all financial services staff', as their announcement this week confirmed. For most staff this training must be completed by 9 December 2019 (and should already have been done for Senior Managers and Certified Persons).

The FCA is driving to improve standards across the financial services industry, and firms may find that the implementation of SMCR offers an opportunity to assess and address any underlying cultural issues within their business.

To do list for insurers

Before 9 December 2019 insurance firms will need to:

  • Complete certification of relevant staff as fit and proper
  • Obtain regulatory references for new appointments into regulated roles
  • Train staff on the new conduct rules

Further expansion of the regime

FCA regulated firms (currently outside of the regime) will watch with interest as the insurance industry gets to grips with SMCR, with a view to learning lessons from both the banking and insurance sectors. SMCR comes into force for all FCA-regulated firms on 9 December 2019.

We are currently advising FCA regulated firms on planning and preparing for SMCR implementation in 2019. It is never too early to start preparations, and we would be delighted to support you on all aspects of SMCR implementation.

Key contact

James Green

James Green Director

  • Employment
  • Financial Services
  • Employment Disputes

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