Principles-based broking

Prior to January 2005 'non-prescriptive regulation' was the vision for how general insurance regulation would be. This means there is a set of rules but that it is down to the individual firms to understand, interpret and implement these rules for their firm. If the FSA were to scrutinise a firm's approach to compliance, they would measure this against the size and complexity of the firm, and risk to the public, that the activities of a particular broking firm potentially presents.

So, firms like Marsh at the top end, large regionals like Smart and Cook, members of networks, and small independent firms are all bound by the same set of rules. However, your approach towards implementation will be based on what is proportionate and suitable for a firm, relative to the criteria above of size, complexity and risk.

The FSA's latest statement in its business plan for 2007/2008 is really an extension of that. The good news is there are not huge numbers of boxes to tick regarding daily operations, however, the onus is on the firm to identify, understand and implement the rules in a sufficiently robust way that if asked you can justify your answer by demonstrating that you have interpreted the rule in a way that is appropriate to your firm.

Keep records of your compliance procedure decision making to demonstrate that you have considered a rule. The last thing you want to be saying to the FSA is 'I didn't think that applied to us'. That will lead them to ask, in what other areas of compliance may this firm be falling short.