Our approach to supervision
The Insurance Supervision team within our Prudential Supervision Department is responsible for implementing our oversight and supervision of insurers. Our supervision of insurers is underpinned by a regime that:
- is consistent in its approach and philosophy with our other prudential supervision
- is focused on outcomes
- avoids imposing unnecessary compliance costs on insurers
- is risk-based.
From time to time, our senior leadership team gives speeches on our approach to prudential supervision. The most recent speech is:
Your responsibilities as an insurer
As an insurer, you must be familiar with, and comply with, all your obligations under the Insurance (Prudential Supervision) Act 2010 (IPSA). We monitor these obligations and investigate and enforce any non-compliance as appropriate
All licensed insurers are subject to supervisory oversight. The IPSA’s regulatory framework places responsibility and accountability for an insurance business primarily with the insurer’s board and senior management.
This means effective self-discipline and market-discipline are central to meeting the IPSA’s objectives. Our supervisory activities will reinforce these disciplines. For example, in the context of self-discipline, directors and senior management of licensed insurers can expect that we will hold them accountable for full compliance with regulatory requirements.
Supervisory resources are finite and, consistent with international best practice, we take a risk-based approach to supervising financial institutions. In practical terms, this means those licensed insurers of greatest significance to the IPSA’s purposes are subject to a greater intensity of supervision.
We determine a licensed insurer’s significance based on gross revenue from policies and premiums and the absolute value of total insurance liabilities. We then apply a risk overlay, concentrating our supervision on those licensed insurers that have the greatest risk of failure and most significance to financial stability.
We have divided licensed insurers into two groups:
- designated insurers
- portfolio-managed insurers.
We assign licensed insurers needing more intense supervision a designated supervisor. This enables us to identify and resolve early any prudential issues. As well as monitoring compliance, our supervisors build an understanding of each insurer's business model, strategy, governance and risks. This is facilitated by the supervisor's analysis and review of your information combined with regular, structured engagement, including at least one prudential consultation meeting after end-of-year returns annually.
A specialised team of supervisors within our Insurance Supervision team supervise all other licensed insurers on a portfolio basis.
Portfolio supervision is oriented towards ensuring requirements are met and that supervisory matters are resolved promptly. Our objective is to understand risk across the portfolio and identify, at a high-level, risks or issues affecting groups of licensed insurers or market segments.
We prioritise engagement by need and in response to events and issues. We maintain regular contact with portfolio-managed insurers through newsletters and industry engagement.
Guidance, forms, reports and updates
We have a suite of guidelines to help you understand the supervision requirements of the IPSA and requirements for licensing.
You need to complete forms when applying for relevant officers' approvals or material change approvals for a fit and proper policy or a risk management programme.
Below are reports we have published relating to supervision of the insurance sector.
We regularly undertake thematic reviews on risk, governance and compliance of insurers we supervise. The reviews assess risks to insurances businesses and assesses their compliance with our regulations.
In June 2020, we published the findings of our thematic review of the appointed actuary role and regime.
Review findings on the quality of the risk governance of insurers
This report covers our findings from a review of the quality of risk governance amongst 17 licensed insurers we conducted during the second half of 2014.