I’m a [insert regulatory descriptor here] what does that mean?

Are you a:

1. Director or officer of a company; and/or
2. A Responsible Person (APRA); and/or
3. Senior Officer Outside Australia (APRA); and/or
4. Accountable Person (FAR - APRA and ASIC); and/or
5. Fit & Proper person (ASIC); and/or
6. Responsible Manager (ASIC); and/or
7. Confused?

In General Insurance there are a multitude of regulatory responsibilities for senior people & often more than one applies to a person.

Compliance & monitoring arrangements and training

Robust compliance & monitoring arrangements, generating relevant & timely data, will enable you to meet all your responsibilities & duties however you do need to ensure that you have allocated time to each responsibility & specifically turn your mind to each of your responsibilities.

I can assist with reviewing & developing fit for pupose compliance and monitoring arrangements.

I can also provide training to cover all people responsibilities that apply across General Insurance.

Contact me for more information

Let's unpack each of these responsibilities.

Director or officer of a company

A Director is defined in section 9AC and an Officer in section 9AD of the Corporations Act.

The definition of an Officer includes director, secretary, partner, office-holder of an unincoprorated association, receiver, administrator, restructuting practitioner, liquidator or trustee. Relevantly, an Officer also includes:

a person:

? (i) ? who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or

(ii) who has the capacity to affect significantly the corporation's financial standing; or

(iii) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation).

Duties (sections 180 and 181 Corporations Act)

A Director and Officer must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise subject to the business judgment rule.

The Business jugment rule provides that the duties are met if the director or officer:

(a) ? make the judgment in good faith for a proper purpose; and

? (b) ? do not have a material personal interest in the subject matter of the judgment; and

? (c) ? inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and

? (d) ? rationally believe that the judgment is in the best interests of the corporation.

Directors and Officers must exercise their powers and discharge their duties:

? (a) ? in good faith in the best interests of the corporation; and

? (b) ? for a proper purpose.

Responsible Person (APRA Prudential Standard CPS 520)

Responsible person position’ means the responsibilities or activities of a responsible person that would lead to the person being a responsible person under the definition in paragraph 20.

Paragraph 20 states:

(c) for a general insurer (other than a Category C insurer) or an authorised insurance NOHC, a person defined in Attachment C;

(d) for a Category C insurer, a person defined in Attachment D;

Attachment C includes a director, senior manager, Appointed Auditor, Appointed actuary & Reviewing Actuary.

Attachment D includes a senior manager, agent in Australia (and a director or senior manager of that agent), Appointed Auditor, Appointed actuary & Reviewing Actuary

Senior manager means a person (other than a director) who:

(a) makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the institution;

(b) has the capacity to affect significantly the institution’s financial standing;

(c) may materially affect the whole, or a substantial part, of the business of the institution or its financial standing through their responsibility for:

(i) enforcing policies and implementing strategies approved by the Board of the APRA-regulated institution;

(ii) the development and implementation of systems used to identify, assess, manage or monitor risks in relation to the business of the institution; or

(iii) monitoring the appropriateness, adequacy and effectiveness of risk management systems; or

(d) for a foreign ADI or Category C insurer, is nominated as the senior officer outside Australia to the extent that the person meets the definition in subparagraphs (a), (b) or (c)

Duties

The responsibilities of a Responsible Person are set out in each of the Prudential Standards .

An APRA-regulated institution must prudently manage the risks that persons acting in responsible person positions6 who are not fit and proper pose to the institution’s business and financial standing. To this end, an APRA-regulated institution must maintain a documented policy relating to the fitness and propriety of the institution’s responsible persons that meets the requirements of this Prudential Standard.

Senior Officer Outside Australia (CPS 520 and APS 001)

A SOOP is the senior nominated officer of a foreign ADI (whether a director or senior executive) outside Australia with delegated authority from the Board to be responsible for overseeing the Australian branch operation.

Accountable Person (RG 279)

(1)? An individual is an accountable person of an accountable entity (APRA regulated insurer) if:

?????(a)? either of the following applies:

???????(i)? in the case of an accountable entity -the person holds a position in the accountable entity or in another body corporate of which the accountable entity is a subsidiary; and

????(b)? because of that position, the person has actual or effective senior executive responsibility:

?????? (i)? for management or control of the accountable entity;

(ii)? for management or control of a significant or substantial part or aspect of the operations of the accountable entity or the accountable entity's relevant group .

Duties

A person who is determined to be an accountable person in accordance with the FAR Act has actual or effective senior executive responsibility for management or control of the whole of, or a significant or substantial part or aspect of, that particular Key Function.

Insurance key functions are:

a) Capital management

b) Collections & enforcements

c) Conduct risk management

d) Data management

e) Financial & regulatory reporting

f) Hardship processes

g) Insurance risk management

h) Operational risk management

i) Product design & distribution obligations

j) Product origination

k) Recovery & exit planning & resolution planning

l) Reinsurance management

m) Scam management

n) Technology management

o) Training & monitoring of relevant representatives & staff

p) Underwriting

q) Whistleblower policy & process

Fit & Proper person (ASIC INFO 240)

A fit & proper person of an AFS Licensee is:

• any officers of a body corporate applicant (officer as defined in Corps Act see above))
• any partners or senior managers of a partnership applicant
• any trustees or senior managers of a multiple trustee of a trust applicant
• any controller of the applicant (AFS Licensee or applying for a licence)
• if a controller is a body corporate, any officer of the controller
• if a controller is a partnership, any partner or senior managers of the controller.

ASIC must be satisfied that the f&p must be fit and proper to provide the financial services covered by the licence. ASIC applies the fit and proper person test in s913BA Corporations Act

Responsible Manager (ASIC RG 105)

An AFS licensee, must maintain the competence to provide the financial services covered by their AFS licence (see s912A(1)(e) Corpos Act). ASIC refers to this obligation as the ‘organisational competence obligation’. This is because this obligation requires the licensee to be competent at the organisational level.

ASIC assesses compliance with this obligation by looking at the knowledge and skills of the people who manage a licensee's financial services business. ASIC refers to these people as ‘responsible managers’

Responsible managers must have direct responsibility for significant day-to-day decisions about your financial services.

Together, your responsible managers need to have knowledge and skills that demonstrate you can provide all of the financial services and products covered by your AFS licence, while complying with the conditions of your licence and any other relevant statutory obligations

You need to be able to demonstrate that each of your responsible managers has appropriate knowledge and skills for their role in your business. There are five options for demonstrating this: see Table 1 RG 105

Duties

An RM is generally responsible for ensuring the licensee adheres to its financial services obligations. This involves making decisions about the ongoing provision of financial services.

Still confused or want to learn more?

As mentioned above, my general insurance compliance services include:

• developing fit for purpose compliance & monitoring arrangements; and
• responsible manager training that includes the responsibilities of senior people working in General Insurance.