Governance review and remediation

The brief

Our client had become concerned about the robustness of a newly acquired subsidiary’s governance and compliance arrangements. UKGI was brought in to identify any areas of weakness and to support the subsidiary, a general insurance wholesale intermediary and claims management business, in addressing any issues uncovered.

UKGI was selected not just on the basis of our comprehensive knowledge of general insurance regulation and compliance, but also because we had the in-depth industry knowledge and experience required to navigate the new subsidiary’s complex operational structure. This entailed a combination of wholesaling and claims management, straddling the line between B2B and B2C, and chains involving up to five different entities.

What we did

As a first step, one of our most experienced consultants carried out a thorough onsite audit, looking at:

  • Governance and compliance reporting framework (Approved Persons Regime, Principles for Businesses)
  • Systems and Controls (SYSC)
  • Training and competence (SYSC 5.5.1) and fitness and propriety (FIT)
  • Complaints handling (DISP)
  • Conduct risk and Treating Customers Fairly
  • Sources of business and the supply chain (ICOBS, CMCOB, SUP)
  • Financials (CASS, PRIN, MIPRU).

Our audit identified a positive conduct risk culture, but poor governance and controls. Too many individual decisions were being taken across various aspects of the business without effective central controls and reporting in place.

Following on from the initial audit, we were commissioned to undertake appropriate remedial actions. We proposed a detailed project plan for this activity, estimating the resources and timeframe required, allowing for a second audit to verify operational integrity.

The four-strong team we put together included both the original auditor and a senior compliance consultant experienced in project management and corporate governance, backed by additional consultants with specialist expertise in areas including claims management.

Remedial actions taken included:

  • Strengthening the firm’s board
  • Appointing a second Approved Person
  • Providing training for the Approved Persons and senior management
  • Augmenting the firm’s internal compliance resources
  • Introducing a formal supply-chain due diligence process for all prospective retail brokers and reassessing current brokers
  • Establishing formal sign-off procedures for broker scheme development
  • Documenting responsibilities and accountability
  • Introducing monthly senior management meetings, including standing compliance items, pre-meeting pack, agenda and minutes
  • Establishing meeting terms of reference
  • Determining a framework for compliance MI reporting
  • Introducing or updating formal policies and procedures in areas such as financial crime, client money, training and competence, handling insurance and claims monies and TCF.

The result

Following these remedial actions, a second audit (carried out by another of our senior consultants who was not involved in the original audit or remedial programme, so as to avoid any conflict of interest) found the subsidiary’s compliance regime to be satisfactory. Both audits and the remedial work project were delivered on time and within budget.

UKGI’s ability to get to grips quickly and authoritatively with the new subsidiary’s governance and compliance issues was a major benefit to the subsidiary firm. Its two Approved Persons – both originally with the parent company – were to be interviewed by the FCA as part of the Business Risk Awareness programme, and needed to be fully apprised of the firm’s strengths and weaknesses to participate fully in this process.

UKGI is a trading style of UKGI Limited and UKGI Services Limited which are wholly owned subsidiaries within UKGI Group Ltd. UKGI Limited acts in compliance services and UKGI Services Limited acts in support services. UKGI Services Limited is a wholly owned subsidiary of Total Broker Solutions Limited, which is an appointed representative of Resolution Compliance Limited, which is authorised and regulated by the Financial Conduct Authority (FCA) under reference number 421154. UKGI Limited Registered in England No. 03544014. UKGI Services Limited registered in England No. 04953835. All Registered Offices Number 22 Mount Ephraim, Tunbridge Wells, England TN4 8AS. VAT registration number 347 2664 82.