What is the new insurer mobilisation authorisation process?
Mobilisation is a new optional regime for insurers. It offers eligible new insurers the opportunity to put in place certain arrangements during mobilisation, which may be more difficult to achieve without the certainty of authorisation. The new insurer would operate with business restrictions and with proportionate regulatory requirements.
Mobilisation may not be necessary for firms that already have the resources, capital, and infrastructure in place, such as a Third Country Branch or a Large International Firm, which allows them to fully set up an insurer from day one of authorisation.
What are the stages of the new insurer mobilisation authorisation process?
New insurers are encouraged to enter the optional pre-application stage, to discuss the mobilisation route with the NISU Team, and determine if a firm is eligible for the mobilisation route. If a potential new insurer is eligible then they will still need to meet the minimum requirements for mobilisation.
During the application process we would assess their business model, ensure that their application meets all the PRA and FCA Threshold Conditions for authorisation, review their short list of activities that remain to be completed and assess how the firm can demonstrate that the items still to be completed can be within the coming 12 months, through their mobilisation plan.
Figure 1: New process for mobilisation
During mobilisation, it is not expected that firms would write a material amount of business. Therefore, a firms’ activities are limited to an overall net exposure (or sum insured/assured) of £50,000. Within this limit, only short-term contracts with a maximum policy term of 1 or 2 years on a claims-made basis can be written.
If firms propose to write new business in mobilisation, for example to test systems, they will need to provide us with a fully developed and credible mobilisation action plan for the business. These should include how the firm will function and run-off plans are showing how they will ensure policyholder protection would work if operations were discontinued.
At the point of Authorisation, a Variation of Permission (VoP) application needs to be applied, to set the capital requirements for the mobilisation period. Firms will be required to meet the PRA and FCA Threshold Conditions from the point of authorisation and ensure that they continue to meet these throughout their time in mobilisation.
New insurers using the mobilisation route will appear on the Financial Services Register as authorised insurers, but with a restriction on the business they can carry out for insurance activities.
What are the benefits and is mobilisation right for all new insurers?
Mobilisation allows new insurers extra time to finalise the development of their firm with the benefit of being an authorised firm. Firms eligible for mobilisation will be assessed on a case-by-case basis. Generally, mobilisation is suitable for start-up firms, which may not have all of the upfront investment they require or may need additional time to complete the build-out of their IT systems or recruit certain staff or engage with third-party suppliers.
We expect firms to use the mobilisation time to complete only the final stages of their development. New insurers should demonstrate through their mobilisation plans that they will be able to complete all remaining development items during the period that they expect to be in mobilisation, taking account that the maximum period of mobilisation is 12 months.
Firms should clearly set out whether they are planning to use mobilisation and why, during the early stages of the pre-application discussion and engagement phase. Upon review of the firm’s initial business plan, we will assess its feasibility and determine whether it could be deemed acceptable for the firm to use mobilisation.
At the application stage, the PRA and FCA will indicate following receipt of the near final business plan whether the approach remains appropriate for a mobilisation route and as an application is being assessed on this planned basis.
This will be subject to the likelihood of being able to meet the PRA and FCA Threshold Conditions at the point of entry into mobilisation and the feasibility of being able to complete all required activities during mobilisation so as to minimise the risk of not being able to complete the plan within the mobilisation period.
What happens during mobilisation?
Firms taking the mobilisation route will generally not have fully developed all operational capabilities, but they must meet the PRA and FCA Threshold Conditions continuously, to move into the mobilisation stage.
|
Assessment area |
Authorisation with restrictions (via mobilisation) |
Authorisation or to Exit mobilisation (a) |
|---|---|---|
|
Business plan/viability |
Fully developed (but minor adjustments will be considered). Material changes may necessitate a reapplication. |
Fully developed. |
|
Financial resources |
Fully developed – the new insurer would need to meet MCR and SCR requirements during mobilisation. However, the absolute floor to the MCR is lowered to £1 million. (These requirements would be revised when exiting mobilisation). |
Fully developed – the new insurer will need to meet their capital requirements. |
|
Sources of funding |
Fully developed for the mobilisation period (including detail on additional fund-raising activities during mobilisation). |
Fully developed. |
|
Financial projections for 3 years |
Fully developed including a complete ORSA. |
Fully developed. |
|
Corporate governance Structure Board Senior Management |
Fully developed governance framework (including key functions of risk management, compliance, actuarial, and internal audit, some of which could be outsourced or combined Key ‘guiding minds’ in place with senior roles critical to mobilisation identified and ready to be recruited. Minimum Board Chair, CEO and one other Executive in place. Firms are encouraged to have identified or have started to recruit other key individuals before entering mobilisation. Firms should also have considered any other necessary hires to deliver the mobilisation plan within the 12 month period to demonstrate effective governance before exiting. |
Fully developed governance framework. (including key functions of risk management, compliance, actuarial, and internal audit, some of which could be outsourced or combined All key Senior Management staff in place. Appropriate number of independent non-executive directors and established good practice is there is at least two of these. Chair must not perform an executive function and there is a strong expectation that they should be independent. |
|
Customer journey including details of products, pricing, and on-boarding arrangements |
Near final, for Customer journey and Consumer duty. However, to be fully developed if firm intends to write retail business during mobilisation. |
Fully developed. |
|
Recovery Plan |
Near final Recovery Plan, (including a run-off plan for any business written during mobilisation, showing how the firm can ensure policyholder protection, if operations were discontinued). |
Fully developed Recovery Plan. Credible solvent exit analysis as part of business-as-usual (BAU) activities. (b) |
|
Business Continuity Plan (BCP) |
Near final BCP. |
Fully developed BCP. |
|
Risk management framework and control structures (including conduct risk and financial crime) |
Near final framework with the necessary controls in place. |
Fully developed. |
|
IT infrastructure and systems |
Draft implementation plan (outlining how the firm intends to build-out, test and apply systems and IT infrastructure to complete implementation plan). |
Fully developed. |
|
Material outsourcing arrangements |
High level outline of approach to outsourcing and third-party arrangements. Fully developed where a firm intends to write business during mobilisation. |
Fully developed. |
|
Policies and procedures |
Not required but development should be planned. Fully developed if wishing to write business in mobilisation.(c). |
Fully developed. |
|
Mobilisation plan |
Fully developed (including timelines for workstream completion) and signed off by the Board. |
n/a. |
Footnotes
- (a) This criteria does not all apply to international insurers operating in the UK through a branch.
- (b) This does not apply to international insurers operating in the UK through a subsidiary.
- (c) Where possible we would want to see drafts of the conduct risk, financial crime, and vulnerable customer policies.