From now on, all insurers in the UK that are regulated by both the Financial Conduct Authority and the Prudential Regulation Authority are subject to the Senior Managers' and Certification Regime.

The SM&CR is an extra layer of bureaucracy that aims to make almost everybody in the financial services industry more accountable to the regulators for their actions. Affected firms are insurers, reinsurers, Insurance Special Purpose Vehicles, the Society of Lloyd's, managing agents and the British branches of non-EU firms.

The new regime has replaced the Senior Insurance Managers Regime and the Revised Approved Persons Regime for insurance firms. When both regulators regulate a firm, they insist on calling it 'dual-regulated.' If only one regulates it, it is 'sole-regulated.'

The most senior people (called 'senior managers') who perform vital jobs (called 'senior management functions') will need approval by the PRA or FCA before starting work. Every senior manager has to have a 'statement of responsibilities' that clearly says what he is responsible and accountable for. Solvency II firms and large non-directive firms also have to provide 'responsibilities maps.'

Under the EU's second directive that governs insurance and reinsurance (aka Solvency II), 'non-directive' firms are generally those with gross premium income below €5 million and gross technical provisions of less than €25 million. A 'Solvency II firm' is a firm that immediately before the Solvency II implementation date was an insurer that had to obey the Solvency I Directive.

Meanwhile, the Certification Regime applies to employees who are not senior managers but whose jobs might (in the regulators' eyes) be important enough to allow them to cause significant harm to the firm or its customers. The FCA calls these jobs 'certification functions'. People who do them do not need to be approved by the regulators, but their employers are obliged to evaluate them at least once a year and tell the regulators (or 'certify') that they are fit and proper to perform their jobs.

The FCA regulates 58,000 firms, including 1,500 dual-regulated ones. In the financial year of 2017/18 it received 4,400 applications for permission to do business (aka 'authorisation'), of which it only turned down 11.