Which Senior Manager Functions Apply

Most insurance brokers and MGAs are solo-regulated Core firms. The Senior Manager Functions typically include the Chief Executive, executive directors, the Chair where there is one, and SMF16 Compliance Oversight. Very large intermediaries can meet the Enhanced thresholds, which brings additional functions and a Responsibilities Map. Our guide to which SMFs apply at each firm tier covers the detail.

One point often surprises firms. The Money Laundering Regulations apply to life insurance and certain investment-related business, but not to general insurance intermediation. A general insurance broker or MGA that doesn’t carry on life business may not need an SMF17 money laundering reporting officer at all. That doesn’t remove its financial crime obligations. Firms still need to manage fraud and sanctions risk, and the FCA expects senior oversight of both.

Where the FCA Focuses

Product Governance and Fair Value

Under the product governance rules in PROD and the Consumer Duty, manufacturers and distributors of insurance products must make sure products meet the needs of their target market and offer fair value. For MGAs, which often act as co-manufacturers with the insurers they write for, this is a direct senior management responsibility. The FCA’s work on fair value in products such as GAP insurance showed how seriously it takes the issue, and how quickly a product can be withdrawn if the value isn’t there.

Distribution Chains and Remuneration

Many insurance products pass through several intermediaries before reaching the customer, each taking a share of the premium. The FCA expects firms to understand the whole chain and whether the total remuneration is consistent with fair value. Senior Managers need management information that shows how much of each premium reaches the insurer and what the customer receives in return.

Appointed Representatives and Delegated Authority

Brokers that act as principals for appointed representatives are responsible for their oversight, and the FCA strengthened its rules for principal firms in 2022. MGAs operating under delegated authority from insurers or as Lloyd’s coverholders face oversight from their capacity providers as well as the FCA. In both cases, the senior team needs to show it controls business written in its name.

Claims Handling and Customer Outcomes

Claims are where customers see whether a product works. The FCA expects firms involved in claims handling to monitor outcomes, including decline rates, delays and complaints, and to act on what they find. Senior Managers should see this information regularly.

The Senior Roles That Matter Most

A Chief Executive With Underwriting and Conduct Credibility

MGA chief executives often come from underwriting backgrounds, and brokers’ chief executives from sales and distribution. Both are valuable, but the FCA expects the person running the firm to own conduct and customer outcomes too. Candidates who have led a firm through a product review, a Consumer Duty implementation or a change in capacity provider stand out.

A Compliance Officer Who Knows Insurance

Insurance compliance is specialised. The SMF16 holder at a broker or MGA needs a working knowledge of insurance distribution rules, product governance, fair value assessments and, for commercial lines, the different expectations that apply to business customers. Compliance experience from banking or investment firms transfers only partly, so direct insurance experience is usually essential.

Finance Leadership

Insurance intermediaries handle client money, including premiums and claims, and many operate under risk transfer arrangements with insurers. Finance leaders need to understand client money and insurance transfer rules, capital resources requirements for intermediaries and, for MGAs, the reporting that capacity providers require. For growing brokers and MGAs that don’t yet need a full-time finance director, our sister practice FD Capital places fractional and interim finance directors, including those with insurance and client money experience.

Independent Non-Executives

Many MGAs are backed by private equity or insurers, and many brokers are owner-managed. An independent non-executive with insurance and conduct experience can strengthen the board’s challenge on fair value and product governance, and reassure capacity providers and investors alike.

Hiring Challenges in the Intermediary Market

Consolidation

The broker market has seen extensive consolidation, with private equity-backed groups acquiring many smaller firms. Each acquisition raises questions about the senior team, from who holds which functions at the acquired firm to how group-level oversight works. Our article on change in control and the Senior Manager team covers the issues.

MGA Growth

MGAs have grown quickly, and many have moved from founder-led start-ups to substantial businesses in a few years. The senior team often needs to grow faster than the founders expect, particularly in compliance, finance and risk. Firms that recruit ahead of growth avoid rushed appointments when capacity providers or the FCA start asking harder questions.

A Specialist Candidate Pool

Experienced insurance compliance officers and finance leaders are in demand, and many prefer established firms. Smaller brokers and early-stage MGAs often find a fractional Senior Manager is the most practical route to experienced oversight until the business can support a full-time hire.

Commercial Lines and Wholesale Business

Not every intermediary deals mainly with consumers. Commercial and wholesale brokers, and MGAs writing specialist commercial risks, deal largely with business customers, and some of the Consumer Duty’s requirements apply differently or not at all to that business. That doesn’t reduce the importance of the senior team. Commercial firms still face product governance obligations, conflicts of interest rules and close scrutiny of remuneration, and many place business into the Lloyd’s market, which brings its own oversight.

For these firms, the most valuable Senior Managers combine technical market knowledge with an understanding of how the regime applies to commercial business. A compliance officer who has only worked with personal lines may need time to adjust, and the reverse is equally true. Firms should be clear about their mix of business when they specify the role.

Questions Boards Should Ask

• Can the firm evidence fair value for each product it manufactures or distributes, including the total remuneration in the chain?
• Does the compliance officer have direct insurance experience?
• Does the firm’s financial crime framework reflect whether it carries on life business, and who oversees fraud and sanctions?
• How does the firm oversee appointed representatives, introducers or delegated authority arrangements?
• Does the board see claims and complaints data regularly, and act on it?
• Is the senior team growing at the pace the business is?

The Bottom Line

Insurance brokers and MGAs sit at the centre of the FCA’s work on product governance and fair value. The Senior Manager team, usually small, carries a lot of that weight. Firms that appoint leaders with genuine insurance and conduct experience, back them with finance and compliance expertise, and build independent challenge into the board are best placed to meet the regulator’s expectations and those of their capacity providers.