Prudential Regulation Authority Rulebook

2.1

A firm must ensure its governing body is ultimately responsible for the firm’s compliance with the PRA rules, FSMA and all applicable laws, rules, regulations and administrative provisions deriving from FSMA that apply to UK Solvency II firms.

[Note: Art. 40 of the Solvency II Directive]

2.2

1. (1) A firm must have in place an effective system of governance which provides for sound and prudent management of its business.
2. (2) The system of governance must include at least:
1. (a) an adequate transparent organisational structure with a clear allocation and appropriate segregation of responsibilities; and
2. (b) an effective system for ensuring the transmission of information.
3. (3) The system of governance must include compliance with at least the following requirements:
1. (a) written policy on risk management in accordance with 2.5;
2. (b) Chapters 2A to 7;
3. (c) Insurance - Fitness and Propriety 2.1 to 2.3, 4.1, 4.3 and 4.4; and
4. (d) Insurance – Allocation of Responsibilities 4;
5. (e) Chapters 11A to 11F;
6. (f) risk management system in accordance with 3.1;
7. (g) compliance function in accordance with 4.1(2);
8. (h) internal audit function in accordance with Chapter 5; and
9. (i) actuarial function in accordance with Chapter 6.

(4) The system of governance must be subject to regular internal review.

[Note: Art. 41(1) of the Solvency II Directive]

2.3

A firm’s system of governance must be proportionate to the nature, scale and complexity of its operations.

[Note: Art. 41(2) of the Solvency II Directive]

2.4

A firm must:

1. (1) establish, implement and maintain written policies and adequate procedures in relation to at least risk management, internal control, internal audit and, where relevant, outsourcing;
2. (2) make those policies subject to prior approval of its governing body;
3. (3) ensure those policies are implemented;
4. (4) review those policies at least annually; and
5. (5) adapt those policies in view of any significant change in the system or area concerned.

[Note: Art. 41(3) of the Solvency II Directive]

2.4A

A firm must establish, implement and maintain documented policies and adequate procedures to ensure that all persons who effectively run the firm or have other key functions are at all times fit and proper within the meaning of Insurance - Fitness and Propriety 2.

2.5

The written policies on risk-management referred to in 2.4(1) must include:

1. (1) policies relating to the areas listed in (i) to (vi) in 3.1(2)(c) as set out in further detail in 3.1A and Chapter 2A; and
2. (2) where the volatility adjustment is applied, a policy on the criteria for the application of the volatility adjustment.

[Note: Art. 44(2) and (2a) of the Solvency II Directive]

2.6

A firm must take reasonable steps to ensure continuity and regularity in the performance of its activities, including the development of contingency plans. To that end, the firm must employ appropriate and proportionate systems, resources and procedures.

[Note: Art. 41(4) of the Solvency II Directive]

2.7

A firm must engage a broad set of qualities and competences when recruiting members to the governing body.

2.8

A firm must put in place a policy promoting diversity on the governing body.

2.9

A firm that maintains a website must explain on the website how it complies with the requirements of 2.7 and 2.8.