On 5 December 2014 the Financial Conduct Authority (FCA) and Prudential Regulatory Authority (PRA) held a skilled person panel briefing.
There were two key messages:
- The regulators are keen to ensure value for money for firms having a review. This is reflected in the cost statistics shown below.
- High standards are expected from reviews. In particular, reports should meet the briefing requirements initially set out and provide a definitive solution. Communication is key to meeting this.
Key statistics on the use of skilled person reviews
The number of skilled person reviews
In the Regulators’ first full year, the number of skilled person reports fell from 113 to 88. If the number to date in 2014/15 continues, we expect to see 110 this year, which is a similar figure to 2012/13. Despite only being mid-way through the year, the PRA has already issued as many reviews as it has previously done in a whole year.
Costs of reviews
Value for money is top of the FCA and PRA’s collective agenda. The total costs for reviews are as follows:
|(£000s)||2012/13*||2013/14||2014/15 Q1-Q2||2014/15 Annualised|
The cost in 2013/14 is very high, mostly driven by the FCA. The figures for 2014/15 are more encouraging.
As a member of the panel for Lot 9 – Prudential – Insurance, Barnett Waddingham is particularly interested in the number of reviews commissioned in this lot. So far this year, 9 reviews have been commissioned. We think this may be Solvency II related and is a trend that is likely to continue as insurance regulation continues to evolve.
Barnett Waddingham comments
It is encouraging to see the figures for 2014/15 are fitting with the regulators’ value for money objective. It is unsurprising that the insurance lot is seeing more reviews given the fast approach of Solvency II. We expect this to increase in coming years. On the other hand, we may see more thematic reviews or preparedness exercises which may be a precursor to full skilled person reviews. We will continue to monitor these figures and provide an annual comparison at the end of their financial year.
*For the FSA statistics, Prudential Business Unit (PBU) is assigned to PRA and Conduct of Business Unit (CBU) is assigned to FCA.
**The PRA figures quoted are for the 11 month period from legal cut over to 28 Feb 2014 (the PRA’s reporting period).