The introduction of the Senior Insurance Managers Regime (SIMR)

The insurance sector is set to experience a huge shift in organisational structures through the introduction of the Senior Insurance Managers regime (SIMR). With only a few months to go until the legislation comes into force, much of the industry is simply not prepared and risks falling short of its requirements.

Ever since the PRA and FCA outlined their plans to reform accountability and responsibility within board rooms of the UK’s insurance sector and introduce Controlled Functions for the most senior positions, the SIMR has drawn significant attention.

In my conversations with leaders across the industry, many are concerned that they will fall foul of the regulations, but also that they face a potential struggle to retain talent in some of the most influential and important positions of their organisations.

They are right to be worried. The introduction of cumbersome legal requirements on senior figures can be too much to bear for some, particularly for those closing in on retirement or are generally not comfortable with the increased scrutiny. As we have seen in similar scenarios in other sectors, regulation can spark a flurry of departures as professionals look for opportunities in less controlled environments.

Consequently, the second challenge will be to find individuals to effectively cover vulnerable positions, or plug the gaps of where alternative expertise is now needed. With this in mind, new recruits need to appreciate the legal requirements and prescribed responsibilities now expected of them. I would urge firms to involve in-house legal counsel, as soon as possible, in the recruitment process to ensure compliance. 

Possibly the greatest challenge for firms will be in managing the wider organisational shift under SIMR. A key area that we believe is being overlooked is the significant pressure that the regulations will have on human resource departments. For many firms, HR teams are already at capacity working through their daily responsibilities to staff.

From our experience in working with the banking sector through the similar SMR regulations, many benefited from appointing an experienced executive to oversee the transition.  These professionals, who often have extensive organisational experience in heavily regulated industries and understand the changes required, can provide valuable direction to ensure swift compliance with minimal disruption to a business’ operations.

At a time when many insurers are under already under pressure from falling margins, market consolidation and Solvency II, it is understandable that the attention of senior leadership teams will be divided.

But, with so little time left to prepare, and given the legal implications for non-compliance, the SIMR should be at the top of boardroom agenda. I would urge the industry to begin preparing for the changes by taking the SIMR seriously, rather than waiting for an almighty shock as 2016 gets closer.