PRA urges industry to improve disclosure mechanisms

Secret talks

Regulator used a Dear CEO letter to raise concerns about whether staff feel able to speak up about poor practices and unidentified risks within their firms.

The Prudential Regulation Authority (PRA) has urged general insurance firms to develop and preserve a culture which makes staff feel comfortable with speaking up and flagging worries that they may have.

Gareth Truran, acting director for insurance supervision at the PRA, made the recommendations in a ‘Dear CEO’ letter published yesterday (5 November).

In the letter, Truran stated that there should be mechanisms put in place to help staff report concerns, which should also involve non-executive board members.

Communication 
General insurer CEOs were warned by Truran that cultural issues may also discourage employees from discussing their firm’s financial soundness.

Senior management were advised to ensure that pressure to deliver financial results does not become inappropriate for people within control functions.

Furthermore, the letter recommended that boards remain alert to this risk and make sure that the effectiveness of the risk control framework is supported by the organisation’s culture.

Truran suggested that, in addition to formal channels such as whistleblowing, boards should think about internal mechanisms that could help key function holders communicate their views and perspectives.

It was revealed that some heads of control functions, such as chief actuaries, told the PRA that they do not have routine opportunities to meet non‐executives outside of formal board meetings. 

Culture
Truran also wrote in support of a speech made in June 2019 by Anna Sweeney, acting executive director for insurance supervision at the regulator.

Sweeny’s speech discussed the regulator’s focus on claims of harassment and bullying within the industry.

At the time, she said: “Such allegations, if proven, where they speak to personal integrity, could impact our view of the fitness and properness of individuals in our senior managers regime.”

Truran stated that the PRA will continue to work closely with the Financial Conduct Authority to assess instances where inappropriate culture and behaviour within firms may have consequences for compliance with regulatory expectations, standards and its statutory objectives.

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