The Financial Conduct Authority is consulting on changes to the approved persons regime for Solvency II firms, as the European rules loom large on the horizon.
In a joint consultation with the Prudential Regulation Authority, the regulator intends to create a structure within insurance firms subject to the European Union directive, making it more likely that individuals and roles are appropriately matched and that high standards of conduct are observed.
The proposals are for the changes to the wider FCA handbook and PRA rulebook, transitional arrangements for firms and affected individuals, and the necessary forms for the implementation of the regime.
In November, the regulators set out their proposals on how they intend to reflect the changes brought about by the Solvency II directive and the Banking Reform Act, followed by proposed changes to the definition and scope of non-executive directors in February.
Earlier this month, the PRA published final rules on how it will implement Solvency II in the UK, with chief executive Andrew Bailey stating it represents “a fundamental change in the way that insurers are regulated”.
Today (27 March), the PRA explained that the firms to which the streamlined senior insurance managers regime will apply are described as ‘non-directive firms’, which pose different risks to its objectives compared with Solvency II firms.
“For example, almost all of these firms have assets of less than £25m and annual premium income of less than £5m,” read the statement. “Accordingly, many features of the senior insurance management function have been streamlined to take a more proportionate approach to the way the regime would apply to NDFs.”
The draft rules set out proposals for how the current list of possible controlled functions would be simplified to a single small insurer senior management function; how the fitness and propriety of those individuals running NDFs will be assessed, and how conduct standards would be applied to the senior managers of NDFs.
In terms of the transition of existing approved persons, regulators propose that individuals currently approved to perform a controlled function and who will be moving due to Solvency II, should be grandfathered.
The paper changes will occur in two stages:
• Stage 1 on 1 January 2016: Implementation of the ‘fit and proper’ requirements in Solvency II for those persons who will be performing, or will be responsible for, key functions.
• Stage 2 on 7 March 2016: Start of the new approved persons regime for Solvency II firms, with changes taking effect when relevant provisions in the act are brought into force.
The FCA is looking for responses by 15 May and plans to publish final rules and forms in the summer.
peter.walker@ft.com
