FCA approval times worsen for new firms as overall picture improves

The regulator targets new firms to have their applications approved within six to 12 months, even if the forms are incomplete.

FCA staff approved 97.8% of applications in the 2021/2022 year-period within the target timeframe. That figure has now declined to 91.7% for January and February 2023.

The slowing approval rate is likely to concern brokers, with experts putting the average start-up cost at £250,000, meaning broking entrepreneurs will want to get trading as quickly as possible.

FCA improvements

Encouragingly, there are signs FCA staff are improving in some key areas.

The FCA targets approving a person to work within three months of receiving the application. The regulator approved 85.9% in the year 2021/2022 year period and, in a positive sign for brokers, that had risen to 94% for January and February period of this year.

The biggest improvement was with ARs, with FCA staff target five working days to process an application.

Only 44.7% of appointed representatives were approved within that five-day target in 2021/2022. That figure has shot up to 95.3% on processing times so far this year.

No need to rush

However, Lea Cheesbrough, managing director of Movo Partnership, said the FCA ‘does not need to rush it’ when it comes to approving ARs. Typically, it takes four months from start to finish to get an AR set up and ready to go, Cheesbrough explained, meaning there should not be a great urgency to get the application done within five working days. 

If they are working on quantity and not quality, especially considering the time they have put into the new AR regime, which is very good, then I do not think they need to do that.

Lea Cheesbrough

She said: “If they are working on quantity and not quality, especially considering the time they have put into the new AR regime, which is very good, then I do not think they need to do that.”

Other areas, such as change of control authorisations and variation of permissions, which are applications by firms to undertake fresh regulatory activity, showed ‘no material change’.

General insurance figures

The latest figures do not include a breakdown for general insurance. However, a Freedom of Information request from Insurance Age in February shed light on performance.

The information request showed the FCA had begun to improve its turnaround times for approving key GI broking roles, bringing the average down to 92 days from 105 days in 2021. This has put the service in line with the statutory three-month target.

Brokers came under the remit of the Senior Managers and Certification Regime on 9 December 2019, meaning that delays have been particularly problematic.

The approval times were so important that the British Insurance Brokers’ Association had urged the FCA to up its game.

Executive director Graeme Trudgill said at the time: “They [the FCA] have a responsibility to support the industry, and they are not making that easy by taking so long in giving these authorisations in regard to things like senior management.”

Market watchers are eyeing the government’s plans to reform the Senior Managers and Certification Regime as an opportunity to speed up approval processes that are taking too long.

SMCR reform 

In December 2022, the government announced a review into SMCR would begin in the first quarter of 2023.

Chancellor of the Exchequer Jeremy Hunt said reform of Senior Managers and Certification Regime and other light-touch regulatory reforms would mean the country could ‘seize on our Brexit freedoms’.

Once upon a time if you put somebody forward as a director of an insurance broker, as long as he was clean, and as long as you had experience, he was approved.

Mike Cranny

When the announcement was made, Mike Cranny, director at consultant Create Solutions, said: “It would be good if they could look at the difficulties in not only the senior managers’ regime, but the whole of the process of authorising managers and brokers.

“The case officers are making life really difficult for everybody.

“We have had a case recently where an established insurance broker with more than 30 years’ experience and FCII, is having his qualifications and abilities questioned in a very routine manner.

“Once upon a time if you put somebody forward as a director of an insurance broker, as long as he was clean, and as long as you had experience, he was approved.”

For all the latest industry news direct to your inbox, sign up for our daily newsletter.