Insurance Board Appointments Under SMCR

Insurance Company Board Appointments Under SMCR: PRA and FCA Expectations

Insurance company board appointments operate within one of the most demanding regulatory frameworks in UK financial services. Insurers are subject to dual regulation — Prudential Regulation Authority oversight for safety and soundness and FCA oversight for conduct — and every board-level appointment at a PRA-regulated insurer requires approval from both regulators. The Solvency II governance framework adds further requirements for the fitness and propriety of the full board and the specific roles designated under the regime, and the PRA’s supervisory approach to insurance board quality has become increasingly intensive since the framework was embedded.

Exec Capital places executives and non-executive directors at insurance companies across general insurance, life insurance, specialist lines and Lloyd’s of London. This guide addresses what insurance company boards and nomination committees need to understand when approaching a senior appointment.

The Regulatory Framework: Solvency II, SMCR and Dual Regulation

UK insurers operate under a governance framework that combines SMCR with Solvency II requirements. Under Solvency II, insurers must ensure that individuals in key functions — including actuarial, risk management, compliance and internal audit — are fit and proper, and that the board as a whole has the collective competence to understand the firm’s activities and risk profile. This collective competence requirement means that the board composition is itself a regulatory consideration, not just the fitness of individual members.

The PRA’s supervisory expectations for insurance board appointments reflect its focus on prudential soundness. The regulator is particularly focused on whether board members understand the insurer’s reserve adequacy, capital model, reinsurance strategy, and catastrophe exposure — and whether the board collectively has the expertise to challenge management on these matters. A board that is strong on governance but weak on technical insurance understanding will face PRA challenge regardless of the individual members’ broader financial services credentials.

The PRA Approval Process for Insurance Board Appointments

PRA approval for senior appointments at insurance companies is more demanding than FCA-only approval in several respects. The PRA’s assessment of a proposed SMF holder focuses specifically on the individual’s understanding of prudential risk — their knowledge of reserving, capital adequacy, reinsurance risk, and the specific risk profile of the insurer’s book of business. For CEO, CFO and CRO appointments at significant insurers, the PRA will typically conduct a formal approval interview that explores the candidate’s prudential knowledge and their understanding of the supervisory relationship.

Boards should allow a minimum of four to six months for the combined PRA/FCA approval process for a CEO or CFO appointment at a significant insurer. For NED and committee chair appointments, the timeline may be shorter, but the PRA’s approval process should not be assumed to run in parallel with the FCA process without specific confirmation from compliance advisers.

The Talent Pool for Insurance Board Roles

The talent pool for executive and non-executive appointments at insurance companies is more segmented than for other financial services firms. General insurance, life and long-term savings, specialty lines, Lloyd’s syndicates and managing agents, reinsurance, and insurance holding companies each require different technical backgrounds, and candidates with deep experience in one segment do not always transfer successfully to another. A CRO candidate with a strong track record in general insurance claims reserving is not necessarily the right profile for a life insurer managing longevity risk, and boards should define the technical requirements of the role with precision before opening the search.

The supply of experienced insurance executives who are FCA and PRA approved, have operated at or near board level, and have the commercial track record to lead a growth-stage or transforming insurer is limited relative to demand. Exec Capital maintains active relationships across the insurance executive community and can conduct discreet approaches to candidates who are not actively seeking a new role but who may be open to a compelling opportunity.

Lloyd’s of London: Additional Considerations

Appointments at Lloyd’s syndicates and managing agents carry additional regulatory considerations beyond the standard FCA/PRA framework. Lloyd’s of London imposes its own governance requirements on managing agents, including minimum standards for board composition, committee structure, and the qualifications of key function holders. The Lloyd’s governance framework operates alongside the PRA and FCA requirements rather than in place of them, and boards at managing agents need to navigate all three sets of requirements simultaneously.

Exec Capital has placed senior executives and NEDs at Lloyd’s managing agents and has a working understanding of the Lloyd’s governance framework and the additional approval requirements it imposes. We advise boards at the outset of the search on how to structure the process to meet all applicable requirements concurrently.

Non-Executive Director Appointments at Insurers

NED appointments at insurance companies present a specific challenge: the pool of genuinely independent candidates who bring both the technical insurance expertise the PRA expects and the governance experience that makes them effective board members is small. The PRA scrutinises whether NEDs are capable of providing genuine challenge to management on actuarial, reserving and capital matters — not simply whether they have broad financial services experience. Boards seeking to appoint their next NED should be explicit in the brief about the specific technical capability gap they are trying to fill, rather than defaulting to a profile that would be appropriate at a less technically complex regulated firm.

The CEO at an Insurance Firm: What SMF1 Requires Under Dual Regulation

The Chief Executive at a PRA and FCA dual-regulated insurance firm carries one of the most demanding combinations of regulatory accountability in the UK financial services sector. The SMF1 holder at an insurer must be approved by both the PRA and the FCA, must maintain a constructive supervisory relationship with both regulators simultaneously, and must be personally accountable for the firm’s conduct standards and its prudential soundness under the PRA’s fitness and propriety requirements.

The practical implication is that the CEO of an insurance firm must be credible on two different regulatory agendas. The FCA is focused on whether the firm treats its policyholders fairly, manages conflicts of interest appropriately, and maintains the governance standards Consumer Duty requires. The PRA is focused on whether the firm is prudentially sound — whether its reserves are adequate, its capital model is robust, and its reinsurance programme provides genuine risk transfer. A CEO who can satisfy the FCA’s conduct-focused agenda but who cannot engage credibly with the PRA on prudential matters will struggle in supervisory meetings from day one.

Exec Capital assesses insurance CEO candidates against both dimensions of the regulatory mandate. We pay specific attention to candidates’ track records in PRA supervisory interactions — how they have presented to regulators, how they have managed a skilled person review or capital model approval process, and how they have navigated enforcement or remediation activity where that is relevant. These are the experiences that prepare a CEO for the dual regulatory relationship the role carries at an insurance firm.

The Board’s Role in Solvency II Governance

Solvency II places specific governance obligations on the boards of insurance firms that go beyond the general SMCR requirements. The directive’s system of governance requirements mandate that the board has the collective knowledge, skills and experience to understand the firm’s activities and the risks to which it is exposed. The board is not permitted to delegate this collective competence — if the board lacks the expertise to understand and challenge management’s presentation of the firm’s reserve adequacy, capital model outputs, or reinsurance programme, it is in breach of its Solvency II governance obligations regardless of the quality of the management team below it.

This creates a specific challenge for nomination committees at insurance firms when making NED appointments. The standard financial services NED profile — strong governance experience, risk committee background, broad financial services knowledge — is not sufficient for a Solvency II board. The firm needs NEDs who can engage substantively with actuarial and underwriting concepts, who can read and challenge an Own Risk and Solvency Assessment, and who understand the difference between technical provisions and best estimate liabilities. Finding candidates who combine this level of technical insurance knowledge with genuine independence and the governance skills required of an effective NED is one of the most demanding recruitment challenges in the regulated financial services sector.

Exec Capital works with insurance firms to identify NED candidates who have the specific technical insurance competence Solvency II requires. We draw on our relationships with former insurance executives, actuaries who have moved into governance roles, and senior insurance professionals who have completed accredited director development programmes to identify candidates who meet the full profile requirement — not simply the governance component in isolation.

Key Function Holders Under Solvency II

In addition to the SMF designations under SMCR, insurance firms must also designate Key Function Holders under Solvency II. The four key functions — risk management, compliance, internal audit, and the actuarial function — must each have a designated holder who is fit and proper for the role. The Key Function Holder requirements overlap with but are not identical to the SMCR requirements, and the fitness and propriety standards for Solvency II key function holders are set out in the PRA’s rules rather than the FCA’s.

The actuarial function in particular is distinctive to insurance firms and has no direct equivalent in other parts of the financial services sector. The Chief Actuary or equivalent must be a qualified actuary with the specific technical expertise to fulfil the role’s obligations under Solvency II, including the technical provisions review, the underwriting and reinsurance opinion, and the risk management opinion. Exec Capital places actuarial function holders and actuarial leaders at insurance firms and understands the regulatory requirements that apply to these appointments alongside the broader insurance board appointments work.

Working with Exec Capital

Exec Capital places executives and NEDs at insurance companies across all segments of the UK market. We conduct retained search for complex or senior mandates and advise on the dual PRA/FCA approval process as an integrated part of every assignment. Call Adrian Lawrence FCA on 0203 834 9616 to discuss your insurance board appointment.