A 5 week consultation period is seeking industry feedback on the proposed list of key functions for the insurance industry & the supporting key functions descriptions (by 19 April 2024)
𝘼 𝙬𝙤𝙧𝙙 𝙤𝙛 𝙘𝙖𝙪𝙩𝙞𝙤𝙣
Insurers should resist the temptation to create a FAR framework (& for the matter a CPS230 framework)
Insurers & underwriting agencies, TPAs, brokers etc are required under Prudential Standards (insurers) or AFSL general obligations (MGA/TPA/Brokers) to have a risk management framework/system. Often the level of sophistication is a factor of the risk maturity of the business.
FAR & CPS 230 presents an opportunity to refresh & enhance existing risk management arrangements not create complexity or duplication through seperate frameworks.
Accountability & culture components should already be included in existing risk & compliance frameworks.
𝙁𝘼𝙍 – 𝙘𝙤𝙧𝙚 𝙤𝙗𝙡𝙞𝙜𝙖𝙩𝙞𝙤𝙣𝙨
The FAR introduces 4 core sets of obligations:
• accountability obligations;
• key personnel obligations;
• deferred remuneration obligations; &
• notification obligations.
𝘼𝙘𝙘𝙤𝙪𝙣𝙩𝙖𝙗𝙡𝙚 𝙥𝙚𝙧𝙨𝙤𝙣𝙨
Central to FAR is the concept of acountable persons.
An accountable person must conduct their responsibilities by:
– acting with honesty & integrity, & with due skill, care & diligence;
– dealing with the Regulators in an open, constructive & cooperative way;
– taking reasonable steps to prevent matters from arising that would adversely affect an insurer; &
– taking reasonable steps to prevent matters from arising that would result in a material contravention of financial services laws.
𝙄𝙣𝙨𝙪𝙧𝙖𝙣𝙘𝙚 𝙠𝙚𝙮 𝙛𝙪𝙣𝙘𝙩𝙞𝙤𝙣𝙨
An accountable person has responsibility for the Insurance Key Function if they have actual or effective senior executive responsibility for management or control of the whole of, or a significant or substantial part or aspect of, the applicable key function.
The draft proposes the following key functions for insurance:
You will readily observe that these can be easily aligned to existing risk categories & Financial Services Laws & Code obligations.
1. Capital management
2. Collections & enforcements
3. Conduct risk management
4. Data management
5. Financial & regulatory reporting
6. Hardship processes
7. Insurance risk management
8. Operational risk management
9. Product design & distribtion obligations
10. Product origination
11. Recovery & exit planning & resolution planning
12. Reinsurance management
13. Scam management
14. Technology management
15. Training & monitoring of relevant representatives & staff
16. Underwriting
17. Whistleblower policy & process
𝗔𝗦𝗜𝗖 𝗥𝗚 𝟮𝟳𝟵
ASIC/APRA has issued an information paper – click here to view!
Have a chat with me if you need assistance