b'INSURANCE REGULATORY|UK/BREXITAnother key driver here is how people areimpact would be. To achieve this, the PRA launched incentivised. This is an area we pay closea quantitative impact study on July 20, 2021, and attention to when we assess firms. We expectworked with the Government to analyze its results. variable remuneration to be linked both toThis study will inform a comprehensive package of financial and non-financial measures.reforms for consultation in early 2022.Remuneration Committees should be thinkingIn September 2021, the PRA consulted on its carefully about what it is that they are rewardingapproach to interpreting and applying the management to do. Do bonuses reflect thedefinition of insurance holding company for the firms purpose? purposes of the PRA Handbook. The consultation is As in 2020, culture was a key regulatory theme forrelevant to insurance firms within the scope of the the regulators in 2021. The FCA and PRAs thinkinggroup supervision part of the PRA Handbook and on culture has most recently evolved from a reviewto the Society of Lloyds. of the harms posed by non-financial misconductThe PRA has clarified that:into a broader range of markers of healthy firm culture, including diversity. As we have seen inthe proposals in this [consultation paper] would other aspects of the regulators thinking on cultureonly apply to future determinations of whether a it is clear that they are moving towards targetingholding company is an insurance holding personal incentives in the form of remuneration tocompany, or a mixed-activity insurance holding achieve their diversity objectives. company. The PRA proposes that existing holding company classifications would not be revisited, unless a trigger event occurs (e.g., an Solvency II Reforms acquisition, or a disposal), or if a firm asks the PRA to reconsider the classification of its The PRA has an ongoing focus on reforming theholding company. prudential regime regulating the insurance industry in the UK, which is based on the EUThis new approach is anticipated to come into directive, Solvency II.effect in February 2022. Following HM Treasurys Review of Solvency II: Call for Evidence published in October 2020, aConsumer Duty-of-Careresponse was published on July 1, 2021. The responses have confirmed the priorities for reformOn May 13, 2021, the FCA announced that it was as set out in the Call for Evidence. These include,consulting on a Consumer Duty that would set amongst other things, capital requirements,clearer and higher expectations to ensure a higher reporting, risk margin and matching adjustments.and more consistent standard of consumer The Government has asked the PRA to modelprotection for users of financial services and help to different options to better understand whichstop harm before it happens. The FCA is concerned combination of reforms would best meet thethat currently financial services do not always work Governments objectives and what the aggregate 106|Global Insurance Industry Year in Review 2021'