Prudential Regulation Authority Rulebook

1.1

Unless otherwise stated, this Part applies to:

1. (1) a UK Solvency II firm;
2. (2) in accordance with Insurance General Application 3, the Society, as modified by 6;
3. (3) in accordance with Insurance General Application 3, managing agents, as modified by 6;
4. (4) a third country branch undertaking (other than a Swiss general insurer);
5. (4A) a third country insurance services provider; and
6. (5) a UK ISPV, in accordance with 7.

1.1A

This Part does not apply to a SRO firm.

1.2

In this Part, the following definitions shall apply:

management responsibilities map

has the meaning given in 5.1.

prescribed responsibility

1. (1) for a firm (other than a third country branch undertaking, a third country insurance services provider, or a small run-off firm) means the responsibilities in 3.1 and 3.3;
2. (2) for a third country branch undertaking (other than a Swiss general insurer) means the responsibilities set out in 3.1 and 3.3 to the extent only that they are relevant to the operations effected by its third country branch, save in relation to 3.1(4) which shall also take account of the operations of the third country branch undertaking to the same extent as is necessary to ensure compliance by the third country branch undertaking with Third Country Branches 13;
3. (3) [deleted.]
4. (4) for a small run-off firm means the responsibilities in 3.2.

third country branch prescribed responsibility

1. (1) for a third country branch undertaking (other than a UK-deposit insurer) means the responsibilities set out in 3A.2 to the extent only that they are relevant to the operations effected by its third country branch); and
2. (2) for a UK-deposit insurer means the responsibilities set out in 3A.2 to the extent only that they are relevant to the operations effected by its third country branch and all its third country undertaking EEA branches.

third country insurance provider prescribed responsibility

means the responsibilities set out in 3B.2.

2.1

Subject to 3A.3 & 3B.3, a firm (other than a third country branch undertaking, a third country insurance services provider, a small run-off firm or a UK ISPV) must allocate each of the prescribed responsibilities set out in 3.1 (other than 3.1(10) and (11)) to one or more persons who, in relation to that firm, are approved under section 59 of FSMA by:

1. (1) the PRA to perform a PRA senior management function; or
2. (2) in relation to relevant senior management functions only, the FCA.

2.2

Subject to 3A.3 & 3B.3, a firm (other than a third country branch undertaking, a third country insurance services provider, a small run-off firm or a UK ISPV) must allocate each of the prescribed responsibilities set out in 3.1(10) and (11) and the prescribed responsibility set out in 3.3, if applicable, to one or more non-executive directors who perform:

1. (1) a PRA senior management function set out in Insurance – Senior Management Functions 4; or
2. (2) an FCA governing function at that firm.

2.3

Subject to 3A.3 & 3B.3, a third country branch undertaking (other than a Swiss general insurer) must allocate each of the prescribed responsibilities set out in 3.1(A1) to 3.1(1), (4), (5), (6), (7) and (12) and each of the third country branch prescribed responsibilities to one or more persons who, in relation to that firm, are approved under section 59 of FSMA or treated as so approved pursuant to a notice given under section 59ZZA, by:

1. (1) the PRA to perform a PRA senior management function; or
2. (2) in relation to relevant senior management functions only, the FCA.

2.3A

A third country insurance services provider who has been given a notice under section 59ZZA must allocate each of the prescribed responsibilities set out in chapter 3B to one or more persons who are treated under that section as approved under section 59.

2.4

A small run-off firm must allocate each of the prescribed responsibilities set out in 3.2 to one or more persons who, in relation to that small run-off firm, are approved under section 59 of FSMA by:

1. (1) the PRA to perform a PRA senior management function; or
2. (2) in relation to relevant senior management functions only, the FCA.

2.5

A UK ISPV must allocate each of the prescribed responsibilities set out in 3.1(A1) to 3.1(A3) to one or more persons who, in relation to that firm, are approved under section 59 of FSMA by:

1. (1) the PRA to perform a PRA senior management function; or
2. (2) in relation to relevant senior management functions only, the FCA.

2.6

A firm must ensure that any responsibilities allocated to, and that form part of the responsibilities of, a person who performs a PRA senior management function in relation to the firm are consistent with the scope of that PRA senior management function and of any prescribed responsibilities, FCA responsibilities and other responsibilities allocated to that person.

3.1

Each of the responsibilities set out in this rule is a prescribed responsibility:

1. (A1) responsibility for the firm’s performance of its obligations under the senior management regime (PR A);
2. (A2) responsibility for the firm’s performance of its obligations under the certification regime (PR B);
3. (A3) responsibility for compliance with the firm’s obligations in relation to its management responsibilities map (PR C);
4. (1) responsibility for ensuring that the firm has complied with its obligations in Insurance - Fitness and Propriety to:
1. (a) ensure that every person who performs a key function but does not also perform a PRA senior management function or a certification function is a fit and proper person; and
2. (b) provide and obtain regulatory references (PR U);
5. (2) responsibility for leading the development of the firm’s culture by the governing body as a whole (PR I);
6. (3) responsibility for overseeing the adoption of the firm’s culture in the day-to-day management of the firm (PR H);
7. (4) responsibility for the production and integrity of the firm’s financial information and its regulatory reporting (PR Q);
8. (5) responsibility for management of the allocation and maintenance of the firm’s;
1. (a) capital; and
2. (b) liquidity (PR O);
9. (6) responsibility for the development and maintenance of the firm’s business model by the governing body (PR T);
10. (7) responsibility for performance of the firm’s ORSA (PR T2);
11. (8) responsibility for leading the development and monitoring effective implementation of policies and procedures for the induction, training and professional development of all members of the firm’s governing body (PR F);
12. (9) responsibility for monitoring effective implementation of policies and procedures for the induction, training and professional development of all of the firm’s key function holders (other than members of the firm’s governing body) (PR G);
13. (10) responsibility for oversight of the independence, autonomy and effectiveness of the firm’s policies and procedures on whistleblowing including the procedures for protection of staff who raise concerns from detrimental treatment (PR N);
14. (11) responsibility for overseeing the development and implementation of the firm’s remuneration policies and practices (PR M); and
15. (12) responsibility for the firm’s performance of its obligations in respect of outsourced operational functions and activities under Conditions Governing Business 7 (PR X).

3.2

Each of the following responsibilities is a prescribed responsibility in respect of a small run-off firm:

1. (1) responsibility for providing the governing body with an up-to-date business plan and all relevant management information (PR T1);
2. (2) responsibility for managing the small run-off firm’s financial resources (PR CC);
3. (3) responsibility for ensuring the governing body is kept informed of its legal and regulatory obligations (PR DD); and
4. (4) responsibility for the oversight of systems and controls, along with risk management policies and procedures, that are proportionate to the nature, scale, and complexity of the risks inherent in the small run-off firm’s business model (PR GG).

3.3

The responsibility set out in rule 3.3(1) is a prescribed responsibility in the circumstances specified:

1. (1) if a firm is not significant and outsources its internal audit function to an external third party service provider (that is, a service provider outside the firm or the firm’s group), responsibility for providing for an effective internal audit function in accordance with Conditions Governing Business 5 and for overseeing the performance of the internal audit function (PR J2).

3A.1

This Chapter applies only to a third country branch undertaking.

3A.2

Each of these responsibilities is a third country branch prescribed responsibility:

1. (1) responsibility for management of the firm’s risk management processes in the UK (PR AA);
2. (2) responsibility for the firm’s compliance with the UK regulatory system applicable to the firm (PR FF);
3. (3) responsibility for the escalation of correspondence from the PRA, FCA and other regulators in respect of the firm to each of the governing body or the management body of the firm and, as appropriate, the firm’s parent undertaking and the ultimate parent undertaking of the firm’s group (PR EE); and
4. (4) responsibility for management of the firm’s systems and controls in the UK (PR BB).

3A.3

In relation to a firm who is treated, by virtue of the EEA Passport Rights (Amendment, etc and Transitional Provisions) (EU Exit) Regulations 2018, as having permission under Part 4A of FSMA to carry on a regulated activity:

1. (1) the prescribed responsibilities set out in 3.1 and the third country branch prescribed responsibilities set out in 3A.2 shall not apply; and
2. (2) each of the responsibilities set out in this rule is a third country branch prescribed responsibility:
3. 1. (i) responsibility for the firm’s compliance with the UK regulatory system applicable to the firm (PR FF)
   2. (ii) where the firm has applied for permission under Part 4A of FSMA to carry on a regulated activity, until such time as the application has been determined or withdrawn, the responsibility for managing the process of obtaining such permission, including, without limitation, the completion and submission of the firm’s application, and providing the PRA with such co-operation and with all accurate and up to date information that it may reasonably require in order to determine whether the requirements for authorisation have been met).

3B.1

This Chapter applies only to a third country insurance services provider.

3B.2

Subject to 3B.3, each of these responsibilities is a third country insurance provider prescribed responsibility:

1. (1) responsibility for management of the application of the firm’s risk management processes to its UK activities;
2. (2) responsibility for the firm’s compliance with the UK regulatory system applicable to the firm;
3. (3) responsibility for the escalation of correspondence from the PRA, FCA and other regulators in respect of the firm to each of the governing body or the management body of the firm and, as appropriate, the firm's parent undertaking and the ultimate parent undertaking of the firm’s group; and
4. (4) responsibility for management of the application of the firm's systems and controls to its UK activities.

3B.3

In relation to a firm who is treated, by virtue of the EEA Passport Rights (Amendment, etc and Transitional Provisions) (EU Exit) Regulations 2018, as having permission under Part 4A of FSMA to carry on a regulated activity:

1. (1) the prescribed responsibilities set out in 3.1 and the third country insurance service provider prescribed responsibilities set out in 3B.2 shall not apply; and
2. (2) each of the responsibilities set out in this rule is a third country insurance provider prescribed responsibility:
1. (i) responsibility for the firm's compliance with the UK regulatory system applicable to the firm:
2. (ii) where the firm has applied for permission under Part 4A of FSMA to carry on a regulated activity, until such time as the application has been determined or withdrawn, the responsibility for managing the process of obtaining such permission, including, without limitation, the completion and submission of the firm's application and providing the PRA with such co-operation and with all accurate and up to date information that it may reasonably require in order to determine whether the requirements for authorisation have been met).

4.1

A firm must identify:

1. (1) each of the functions that the firm considers to be a key function; and
2. (2) any such key function that amounts to effectively running the firm (or, for a third country branch undertaking other than a Swiss general insurer, effectively running the operations effected by the third country branch or for a third country insurance services provider, effectively running the activities carried out in the UK.

4.2

A firm must keep its identification of key functions pursuant to 4.1 up-to-date.

4.3

A firm must keep a record of its reasoning for the identification of key functions pursuant to 4.1.

5.1

A firm must have and maintain a management responsibilities map, which is a clear and coherent document or series of documents with the following details:

1. (1) a list of the key functions identified by the firm in accordance with 4.1 highlighting those that amount to effectively running the firm (or, for a third country branch undertaking other than a Swiss general insurer, effectively running the operations effected by the third country branch or for a third country insurance services provider, effectively running the activities carried out by the third country insurance services provider, in the UK;
2. (2) the names of the persons who effectively run the firm (or, for a third country branch undertaking other than a Swiss general insurer, effectively run the operations effected by the third country branch or for a third country insurance services provider, effectively running the activities carried out by the third country insurance services provider, in the UK;
3. (3) for each person named pursuant to 5.1(2), a summary of the significant responsibilities allocated to that person (including, if applicable, any prescribed responsibilities that have been allocated to that person in accordance with 2);
4. (4) where any responsibilities covered by 5.1(3) are allocated to more than one person, details of how those responsibilities are shared or divided between the persons concerned;
5. (5) reporting lines and lines of responsibility for each person listed pursuant to 5.1(2);
6. (6) where a firm (other than a third country branch undertaking or third country insurance services provider) is a member of a group:
1. (a) how the firm’s management and governance arrangements fit together with those of its group and the extent to which the firm’s management and governance arrangements are provided by or shared with other members of its group; and
2. (b) for the persons listed pursuant to 5.1(2), details of the reporting lines and the lines of responsibility (if any) to persons who are employees or officers of other group members or to committees or other bodies of the group or of other group members;
7. (7) matters reserved to the governing body (including the terms of reference of its committees) and including, in the case of a third country branch undertaking, the equivalent body (or its committees) responsible for the management of the third country branch undertaking’s business activities in the UK and in the case of a third country insurance services provider, the equivalent body (or its committees) responsible for the management of the firm’s activities in the UK.

5.2

A firm must update the management responsibilities map:

1. (1) at least quarterly; and
2. (2) in the event of a significant change to:
1. (a) the firm’s governance structure;
2. (b) the significant responsibilities allocated to a key function holder; or
3. (c) the reporting lines or lines of responsibility for a key function holder.

5.3

A firm must, as soon as reasonably practicable, provide the following to the PRA:

1. (1) upon request by the PRA, a copy of the management responsibilities map; and
2. (2) in the event of an update pursuant to 5.2(2), a copy of the relevant part of the management responsibilities map.

5.4

A firm must keep an up-to-date record of the statement of responsibilities of each key function holder.

5.5

A statement of responsibilities form, where it is kept and maintained on behalf of a key function holder, will satisfy the requirement in 5.4.

5.6

The record in 5.4, and each updated version, must be signed by the key function holder and an appropriate representative of the firm.

5.7

Where a firm amends its management responsibilities map to show changes in a person’s responsibilities it must also ensure that:

1. (1) the person concerned is informed in writing of the changes; and
2. (2) the record in 5.4 is amended to show the changes.

5.8

Each version of both the management responsibilities map and the record in 5.4 must be retained for a period of ten years from the date on which it was superseded by a more up-to-date record, and must be provided to the PRA on request.

5.9

[Not currently used.]

5.10

A firm must comply with 5.8 in relation to any record created in accordance with SYSC 2.2.1R of the PRA Handbook as at 31 December 2015.

6.1

This Part applies to the Society and managing agents separately.

7.1

This Chapter applies only to firms that are UK ISPVs.

7.2

A firm that is a UK ISPV is not required to comply with the requirements laid down in:

1. (1) 4 (Identification of Key Functions); and
2. (2) 5.1 to 5.3 and 5.7 (Records).

7.3

The requirements in 5.4 and 5.6 apply to a firm that is a UK ISPV as if any reference to a key function holder were a reference to a PRA senior management function holder.

7.4

The requirements in 5.8 apply to a UK ISPV as if the reference to the management responsibilities map were deleted.