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)
๐ผ ๐ฌ๐ค๐ง๐ ๐ค๐ ๐๐๐ช๐ฉ๐๐ค๐ฃ
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.
๐๐ผ๐ – ๐๐ค๐ง๐ ๐ค๐๐ก๐๐๐๐ฉ๐๐ค๐ฃ๐จ
The FAR introduces 4 core sets of obligations:
โข accountability obligations;
โข key personnel obligations;
โข deferred remuneration obligations; &
โข notification obligations.
๐ผ๐๐๐ค๐ช๐ฃ๐ฉ๐๐๐ก๐ ๐ฅ๐๐ง๐จ๐ค๐ฃ๐จ
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.
๐๐ฃ๐จ๐ช๐ง๐๐ฃ๐๐ ๐ ๐๐ฎ ๐๐ช๐ฃ๐๐ฉ๐๐ค๐ฃ๐จ
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
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ASIC/APRA has issued an information paper – click here to view!
Have a chat with me if you need assistance