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The Prudential Regulation Authority (PRA) has published a consultation paper introducing a new accountability regime for the insurance sector. The proposals aim to embed a clearer system of accountability and responsibility for senior individuals working for insurance firms and groups.
In July 2014, the PRA consulted on a similar regime for the banking sector, as required by the Banking Reform Act 2013. The regime for insurers is not identical to that for banks, given the differences in business models and risks posed to the PRA’s objectives. Specifically, none of the potential criminal sanctions, nor the ‘presumption of responsibility’ in the banking regime, will apply to any of the individuals in ‘senior insurance management functions’.
The new regime also takes account of the need to introduce measures relating to governance and the fitness and propriety of individuals as part of Solvency II.
The Senior Insurance Manager’s Regime will apply to senior managers who are running insurers, or who have responsibility for key functions. As such, the PRA proposes a more focused range of individuals within insurance firms who will be subject to regulatory pre-approval. These are individuals who would be held responsible and accountable for ensuring the ongoing safety and soundness of their firm and the appropriate protection of policyholders.
The regime will apply to
Firms will have to allocate certain responsibilities, including specific responsibility for developing and embedding the culture of the firm, to one or more of these individuals. The PRA is also proposing to introduce new conduct standards for these individuals.