Finalised UK FCA and PRA Phase 1 SM&CR Reforms: Key Implications for (Re)Insurers and Lloyd’s Managing Agents

The UK Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have finalised Phase 1 reforms to the Senior Managers & Certification Regime (SM&CR) (PS26/6 and PS12/26), alongside updates to PRA SS35/15, which are of particular relevance to (re)insurers and Lloyd’s managing agents. Most changes took effect on 24 April 2026, with further FCA system updates to follow later this year. 

The reforms form part of a broader programme intended to reduce operational and administrative burden across the SM&CR framework, while preserving the regime’s core accountability objectives. The changes focus on areas that firms have historically found complex or operationally burdensome, including

• the 12-week rule
• SMF7 (Group Entity Senior Manager)
• SMF18 (Other Overall Responsibility)
• Statements of Responsibilities (SoRs)
• Management Responsibilities Map (MRMs)
• criminal record checks
• regulatory references
• conduct rules notifications
• the certification regime

While the reforms are intended to simplify and clarify the regime rather than fundamentally reshape it, they signal a meaningful shift in supervisory expectations. In particular, firms are expected to demonstrate clearer allocation of responsibilities, ensure that governance documentation reflects how decisions are made in practice, and demonstrate the reasoning behind key judgments.

SMF7 as the central focus: Substance over form in group structures

The most significant development for (re)insurers and Lloyd’s managing agents is the further clarification of the SMF7 (Group Entity Senior Manager) role.
The PRA has sharpened the boundary of SMF7 by focusing on “real influence” over UK regulated activities rather than formal position or group seniority. The key distinction is now clearer:

• Individuals involved only in group strategy or advisory roles, where the UK entity can independently accept or reject input, are less likely to be in scope.
• Those who exercise direct or ongoing influence over how the UK firm’s regulated activities are managed are more likely to require approval.

This is explicitly a substance-based and fact-specific assessment. Firms are expected to assess how influence operates in practice, including where it is exercised informally or outside formal governance structures, rather than relying on job titles or reporting lines.

This creates a risk that individuals who have not historically been treated as in scope may now fall within the regime if their influence is reassessed on this basis.

A particularly important development is the targeted extension of SMF7 to controllers and their representatives where they exert significant influence over day-to-day management of the firm/group. This is likely to be a key area of supervisory scrutiny, especially in group structures where decision-making is driven at parent or shareholder level.

While the PRA has indicated that the reforms are not intended to materially expand the SMF7 population, in practice many firms will need to reassess existing roles and governance arrangements. The exercise is less about identifying entirely new individuals and more about ensuring that the rationale for inclusion or exclusion is robust, evidence-based, and clearly documented.

The PRA has also emphasised that although firms are responsible for identifying SMF7 roles, it may reach its own conclusions in exceptional cases, reinforcing that this is not a purely technical classification exercise but one where supervisory judgment remains central.

Other key developments

SMF18 (Other Overall Responsibility):

The FCA has clarified the scope of SMF18 (Other Overall Responsibility), removing earlier guidance that the role must have “equal status” to executive directors, which it acknowledged could be too restrictive in complex or group structures.

This change gives firms more flexibility in identifying individuals responsible for business areas not covered by another senior management function (SMF). However, the core test is unchanged: The role should capture the most senior individual with actual responsibility, based on the substance of their role and reporting lines rather than formal hierarchy.

Operational simplifications:

The reforms also introduce a number of operational and administrative simplifications intended to reduce compliance burden while preserving core accountability requirements. Key changes:

12-week rule: Firms now have 12 weeks to submit an SMF application (rather than obtain approval within that period), with temporary cover permitted until determination of the application.

SoRs and MRMs: Updated SoRs and MRMs may now be submitted within six months of a significant change, with firms only needing to submit the latest version during that period.

Criminal record checks: Validity periods have been extended from three to six months, and duplicate checks are no longer required for certain internal or intragroup SMF moves.

Regulatory references: FCA guidance now expects references to be provided within four weeks rather than six. Additional guidance also clarifies how firms should approach incomplete investigations and suspected misconduct.

Certification regime: Firms may incorporate certification into existing appraisal processes and use digital certification processes. The FCA is also removing certain overlapping certification requirements.

Conduct rules notifications: Updated guidance clarifies when conduct rule breaches must be notified and distinguishes between disciplinary sanctions and investigatory suspensions.

Although these reforms reduce administrative friction, firms must continue to maintain accurate governance records, allocate responsibilities clearly, and ensure that ongoing fitness and propriety assessments remain robust.

Updated SS35/15:

Updated SS35/15 reinforces that the SM&CR should operate as a dynamic governance framework, with SoRs and MRMs embedded in internal processes such as succession planning, performance management, and governance reviews.

Practical implications

• SMF7 is likely to be a key area of focus. Firms should revisit group structures to assess where real influence sits.
• Governance documentation must reflect how decisions are actually made.
• Firms must clearly demonstrate and document their judgments.
• Internal processes should align with the more flexible framework.

Looking ahead

Phase 1 is intended to deliver targeted burden reduction within the constraints of the current legislative framework. More substantial reforms are expected to follow as part of Phase 2, subject to HM Treasury’s proposed legislative changes to SM&CR.

The PRA and FCA have indicated that Phase 2 may include broader reform of SMFs, further simplification of SoRs and MRMs, and wider reform of the Certification Regime. HM Treasury has also proposed removing the Certification Regime from the Financial Services and Markets Act 2000 entirely, following which the regulators are expected to consult on a more proportionate replacement framework.

For insurers, reinsurers and Lloyd’s managing agents, the key immediate focus is likely to remain governance clarity, accountability mapping, and the practical application of SMF7 within complex group structures.