What Is SMF23?

The Chief Underwriting Officer is the person with responsibility for the underwriting decisions of the firm. That typically covers the underwriting strategy and appetite, the authority given to individual underwriters and delegated authority partners, pricing discipline, risk accumulation and the controls that keep underwriting within the limits the board has set.

The PRA designates the role as a Senior Manager Function, SMF23. The holder needs regulatory approval before starting, has a Statement of Responsibilities, is subject to the Senior Manager Conduct Rules and falls within the Duty of Responsibility. The detailed requirements are in the insurance parts of the PRA Rulebook, with the FCA’s rules on Senior Managers in SUP 10C. Insurers are dual-regulated, so the PRA leads on approval with the FCA’s consent; see PRA vs FCA dual regulation.

Who Needs an SMF23?

SMF23 applies to PRA-regulated insurers and to managing agents in the Lloyd’s market. The exact scope depends on the firm’s category and structure, so the PRA Rulebook should be checked for any particular firm. As a general guide:

Our guide to which SMFs apply at which firm tier sets out the wider picture, and the complete guide to SMF designations lists every function.

SMF23a and SMF23b in the Lloyd’s Market

The Lloyd’s market has its own Senior Manager Functions, designated by the FCA, that sit alongside SMF23. The Underwriting Risk Oversight function (SMF23a) and the Conduct Risk Oversight function (SMF23b) apply to the Society of Lloyd’s itself, reflecting its role in overseeing the market’s managing agents. They are not usually functions that an individual managing agent fills, and firms should take care not to confuse them with SMF23 at managing-agent level.

The detail of how these functions apply is specific to the Lloyd’s market, and firms should check the current FCA and PRA rules, and any requirements set by Lloyd’s for managing agents, before relying on a particular reading. Managing agents also need to satisfy Lloyd’s own approval processes for senior individuals, which run alongside the regulators’ requirements.

What the Chief Underwriting Officer Does

The role combines commercial and control responsibilities. The Chief Underwriting Officer must grow the book profitably while keeping underwriting within appetite, and the regulators expect them to stop or rein in business that falls outside the firm’s limits, even when that is commercially unpopular.

Delegated Authority and the Consumer Duty

Much of the London market’s business is written through delegated authority, where coverholders and managing general agents bind risks on the insurer’s behalf. That puts a heavy oversight burden on the Chief Underwriting Officer: the firm remains responsible for business written in its name, so it needs clear authorities, regular audits of delegated partners and good data on what is being written. Where the business reaches retail customers, the Consumer Duty adds a further layer. Product governance and fair value assessments must cover products distributed through intermediaries, and the Chief Underwriting Officer is often central to that work alongside the firm’s conduct and compliance functions. Our guide to the Consumer Duty for Senior Managers covers the board-level expectations.

How SMF23 Fits With Other Senior Managers

At an insurer or managing agent, the Chief Underwriting Officer works most closely with:

• the Chief Actuary (SMF20), whose opinion on the underwriting policy and reinsurance arrangements forms part of the actuarial function’s work;
• the chief risk officer (SMF4), who sets and monitors risk appetite;
• the chief finance officer (SMF2), on capital and financial performance; and
• the chief executive (SMF1), on strategy and growth.

The responsibilities map should set out clearly who is responsible for what, particularly for delegated authority, reinsurance purchasing and claims, where responsibilities can overlap.

Approval for SMF23

The PRA’s assessment of an SMF23 candidate focuses on whether they have the experience and judgement to run underwriting for this firm. That usually means:

• Relevant classes of business. Underwriting experience in the lines the firm writes, such as property, casualty, specialty, marine or reinsurance.
• Leadership. Experience of leading underwriting teams and managing authorities, not just writing risks personally.
• Control. A track record of operating within appetite and dealing with underperforming business.
• Regulatory understanding. Familiarity with the PRA’s and, where relevant, Lloyd’s expectations.
• Fitness and propriety. Assessed under the fit and proper test, including regulatory references.

The PRA may interview candidates for significant roles. Our guide to preparing for an approval interview sets out what to expect.

Recruiting a Chief Underwriting Officer

The London market has a deep pool of senior underwriters, but far fewer with the leadership, control and regulatory experience to hold SMF23. Firms recruiting should think about:

• Classes of business. The candidate’s background should match the firm’s book, or the firm’s planned direction.
• Delegated authority. Firms writing significant business through coverholders or MGAs need a candidate with strong oversight experience.
• Market relationships. Broker relationships matter commercially, but should not outweigh control experience.
• Restrictive covenants. Senior underwriters often have non-compete and non-solicitation terms, which affect timing.
• Approval timing. Dual-regulated approvals, and Lloyd’s approval for managing agents, take time. See how long an SMF appointment takes.

Our page on SMF recruitment for insurers covers the wider insurance Senior Manager team, and many insurers use a retained executive search for confidential SMF23 appointments.

Frequently Asked Questions

Which firms need an SMF23?

PRA-regulated insurers and Lloyd’s managing agents, depending on their category and structure. Check the PRA Rulebook for your firm.

Do insurance brokers or MGAs need an SMF23?

No. Intermediaries are FCA solo-regulated and fall under the solo-regulated regime, where SMF23 doesn’t apply.

What are SMF23a and SMF23b?

Lloyd’s-specific functions covering underwriting risk oversight and conduct risk oversight, which apply to the Society of Lloyd’s rather than to individual managing agents. Check the current rules for the detail.

Who approves an SMF23?

The PRA, with the FCA’s consent. Managing agents also need to satisfy Lloyd’s requirements.

How long does an SMF23 search take?

Typically three to five weeks to shortlist, with notice periods, restrictive covenants and the regulators’ assessment on top.