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PRA consults on SIMR amendments

Large insurers could be required to have policies in place to promote board diversity under plans put forward by the Prudential Regulation Authority (PRA).

The proposal forms part of a package of “amendments and optimisations” to the Senior Insurance Managers Regime (SIMR), which came into force last year.

The intention is to tackle the groupthink among board members that emerged during the crisis.

"More effective challenge and including a broader set of perspectives should help boards to identify a wider range of risks and be better positioned to understand their impact, in turn providing greater protection for policy holders," the PRA said in its consultation, which closes on 22 September.

"Although diverse board composition is not on its own a guarantee of board effectiveness, one of the ways in which challenge can be encouraged and be more robust is through having sufficient diversity of approach, skills and experience on the board, so that potentially complex and technical issues can be thoroughly probed and discussed," it said.

The consultation also proposes the introduction of a new 'chief operations' SIMR function, defined as "the most senior individual responsible for managing the internal operations and technology of a firm". Insurers would also be required to designate named senior managers as responsible for 'outsourced operations', and for any sufficiently large and complex 'key business areas' within the business.

Large firms would also be required to separate the chair and chief executive roles, as is already required of banking firms under the Senior Management Rules (SMR).