There has never been more scrutiny on general insurers and insurance intermediaries than in the current climate
Regulators and investors need and want to be certain that firms and the people that run them have the highest standards of compliance and governance.
This is not just a paper exercise. Nothing could be more real than the FSA's 'arrow' risk assessment visits and themed reviews of firms. It has already shown that it is not shy about investigating and taking enforcement action against individuals and firms in this sector who fail to deliver.
In other words, the regulator has made it very clear that the buck stops with you.
It is not just good business practice but common sense to take steps now which will support your business later. Whether you are a well-established firm or a general insurance intermediary entering the regulatory arena for the first time, satisfying the FSA's requirements on governance, systems and controls is a vital part of any and every successful compliance framework.
The pressure is on. The implementation of the Integrated Prudential Sourcebook for Insurers at the end of 2004 brought with it more prescriptive risk management responsibilities, detailed requirements and a direct impact on an insurer's regulatory capital requirements.
Add to this the far-reaching conduct of business rules introduced in January 2005 and you are faced with developments which mean it is critical for you and your business to understand, adapt and demonstrate that you have what it takes to comply.
The adequacy of senior management oversight and control, management information, compliance monitoring and sufficient supporting documentation, are matters which regularly appear on firms' risk mitigation programmes.
For general insurance intermediaries, having only recently come under the FSA's wing, the new requirements represent an important challenge.
Their activities are a top priority for the FSA in its first round of visits following the introduction of the new regulatory regime.
The FSA also expects, both collectively and individually, directors and senior managers to take appropriate practical responsibility for their firms' regulatory matters.
Added to this is the requirement that "the governing body should take explicit responsibility for all aspects of the regulatory returns, including the data and reports".
This means that notifications to the FSA must be accurate and complete and have been adequately challenged and scrutinised within the firm before submission.
The directors of general insurers are required to certify in the directors' certificate accompanying the annual insurance return, compliance with key aspects of the FSA Handbook and the RMAR (the annual return to FSA) covers all aspects of a firm's compliance with the rules.
"This is as far as it gets from rubber-stamping. Directors and senior managers will want to sign on the bottom line without exposing themselves to undue individual and collective regulatory or commercial risk", says Jane Portas, director in KPMG's general insurance regulatory practice.
The FSA intends, 'risk based regulation' to be less intrusive and less prescriptive. Senior managers however will want to know they have put all the steps in place so they can exercise effective and comprehensive oversight of their businesses. They will want compliance reporting mechanisms that give them confidence in committing their returns to the FSA.
Getting this right requires senior managers to find a way to ensure compliance with high level principles and rules is embedded within the firm's day to day procedures. These procedures must then be adequately monitored and supported by relevant and timely management information.
With many years of experience of working with a wide variety of FSA-regulated firms, KPMG can help senior managers and intermediaries find a practical and efficient way to meet the FSA's requirements. This includes assisting and guiding senior managers in establishing or reviewing governance policies, high level risk management systems and controls, management information and monitoring arrangements.
For more information contact Jane Portas, director in KPMG's general insurance regulatory practice at email@example.com