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Summary of Regulator Assessment: Qualifying Regulatory Provisions

Title of Proposal

PS15/31: Final Rules on changes to the Approved Persons Regime for insurers not subject to Solvency II

Lead Regulator

• PRA/FCA

Date of Assessment

• 16/12/2015 (publication date)

Commencement Date

• 7/3/2016

Origin

• Domestic

Implementation of Cutting Red Tape Review

• No

Areas Affected

• Whole of UK

Brief Outline of Proposed Regulatory Activity

The proposed changes focus on the Approved Persons Regime for Non-Directive Firms (NDFs), which are insurance firms not subject to Solvency II. The regime aims to ensure robust accountability of senior staff, while balancing proportionality in regulation for small and large NDFs.

Key Changes:

• Controlled Functions (CFs):

  • The FCA continued to approve CF1, CF3, CF5, and CF6 as FCA Significant Influence Functions (SIFs), even though the PRA proposed to stop pre-approving them.
  • CF28 and CF8 were removed from the pre-approval regime, reducing the regulatory burden on NDFs.

• Governance Requirements:

  • Large NDFs are required to maintain governance maps by March 2016.
  • Scope of responsibilities documents must be prepared for all SIF holders by March 2016 (large NDFs) and September 2017 (small NDFs).

• Record Keeping:

  • A six-year record keeping period was introduced for all NDFs, aligning with existing SYSC 2.2 requirements.

• Conduct Rules:

  • New FCA Conduct Rules were applied to all approved persons, mirroring those for banks and Solvency II firms.
  • These rules include Conduct Rule 4 for all approved persons and Significant Influence Conduct Rule 3 (SI3) for SIF holders.

• Definition of Small NDFs:

  • The PRA revised the definition of small NDFs to require assets to exceed £25m for two consecutive year-ends before a firm is classified as large. This change allows more time for firms to adjust their status and governance arrangements.

Business Impact

Affected Businesses

• Small NDFs: Estimated to be around 100 UK insurance firms, primarily mutuals and some friendly societies.
• Large NDFs: Fewer than 10 firms existed as of August 2015.

Policy Changes and Business Impact

Additional Information

• The changes were based on public consultations (CP15/15 and CP15/25), with the final rules outlined in PS15/31.
• Transitional arrangements were introduced, allowing existing Controlled Function holders to be grandfathered into the new regime.
• The BIT score is 0, indicating that the policy changes are cost neutral or benefit-neutral.

Links to Consultation Documents

• CP15/15
• CP15/25
• PS15/31