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Barnett Waddingham
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Only a modest increase in Section 166s going forward?

Published by Cherry Chan on

Ciara Russell contributed to the writing of this blog post

We have discussed the introduction of the Skilled Persons Panel in our blog earlier this year in May. In short, the Financial Conduct Authority (FCA) or Prudential Regulation Authority (PRA) can contract a skilled persons review directly in addition to the firms contracting the skilled persons themselves.

Urban Myth

Is the common myth that there will be a dramatic increase in use of S166 true? Well, maybe not - yet.

FCA and PRA have published on their website the latest number of Skilled Persons Reviews (SPR) or Section 166 (S166) as at 30 September 2013. From 1 April 2013 to 30 September 2013, there were 47 S166 issued by both FCA and PRA in total. Although they have the power to appoint SPR directly, only 5 were contracted directly up until 30 September 2013. Out of the 47 reviews, FCA issued 31 and PRA issued 16. PRA has issued less which is not that surprising as they regulate fewer firms than FCA.

Comparing to the same period last financial year when Financial Service Authority (FSA) still existed, there were 61 S166 issued by the FSA, compared to 47 issued by FCA and PRA combined - a drop of 14 reviews.

The table below shows a detailed breakdown of the number of S166 reviews by firm business type and regulator for the 2013/14 financial year as at 30 September 2013. 

The table below shows a detailed breakdown of the number of S166 reviews by lot and regulator for the 2013/14 financial year as at 30 September 2013. 

S166 - a Supervisory Tool

The message we gleaned from the regulators is that S166 should not be viewed as an enforcement tool – they are now part of their normal framework so increase uses of it is reasonable. We would expect the industry to be very unhappy if there is a dramatic increase in S166 due to the cost and time required to spend on these reviews.
The regulators acknowledged that they will only use S166 where it is appropriate, mainly:

  1. when they need expertise to validate/check or provide an in depth investigation into an area, or
  2. more efficient use of resources, or
  3. they may use it to validate something the regulator has asked the firm to do previously.

We understand that FCA and PRA are conscious of the cost associated with S166 and stressed that S166 has to be proportionate i.e. the costs proportional to the work required.

Contract direct

Although only 5 have been contracted directly by the regulators up until the 30 September 2013, the fact that there is a panel of firms on FCA and PRA websites, will hopefully help firms who are appointing their own skilled persons to do so more easily.  Whether there will be more S166 contracted directly in the future is still an unknown.

Barnett Waddingham will give an update when the next set of statistics is published.

About the author

  • Cherry Chan

    Cherry advises a range of UK general (re)insurance companies and international captives on actuarial issues including statutory reserve reviews, reinsurance and insurance programme optimisation and Solvency II implementations. She also acts as Actuarial Function to a number of clients.

    View Biography

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