Dealing with regulation is a task that can be difficult for many companies to deal with at the best of times.

In the midst of a pandemic and with a wave of changes ranging from the UK’s departure from the EU to new Financial Conduct Authority (FCA) directives, it becomes even more difficult, particularly as business and governments place an ever-higher value on environmental, social and corporate governance concerns.

Kenneth Underhill, compliance, risk and corporate governance specialist and director of risk and compliance consulting firm ICSR, has more than 30 years of experience as a regulatory specialist with both law firms and industry companies.

He spoke to the Re/insurance Lounge, Intelligent Insurer’s online, on-demand platform for interviews and panel discussions with industry leaders, to discuss the changing face of regulation and the idea behind launching his own company.

Underhill started his career in Australia where he qualified as a lawyer, before relocating to the UK and working for a number of large City legal and broking firms and becoming a partner at Reynolds Porter Chamberlain.

He then moved into the re/insurance industry with ACE, where he served as a director across the UK, Europe, the Middle East and Africa responsible for corporate governance, risk and compliance.

ICSR was launched in 2017 following a series of discussions with other market participants about the idea of setting up a consultancy “only with people from the market”.

“There are no career consultants here. Everybody has worked for brokers, or for insurers, or managing general agents, or whatever the case may be. They all have a good reputation, and they’re all well respected,” Underhill said.

“When somebody says we need some help, what they’re getting is somebody who has been in the market and knows what they’re doing.

“That was the idea, to have people who are pragmatic and can get on and provide the sort of advice that people need without having to be taught what the business model of the client is.”

ICSR has worked on every major issue involving the FCA in the last five years, advising businesses on everything from due diligence for M&A and Brexit to vulnerable customers, General Insurance Pricing Practices, the Product Intervention and Product Governance Sourcebook (PROD) and value in the distribution chain, with significant growth running into the COVID-19 pandemic before recovering now that the worst is (we hope) behind us.

Underhill says his motivation to start the firm came from his enjoyment of “fixing things”, with the time right in his career to take the step of launching his own firm.

“It was the right time for me to try something else. If I left it any longer I think I would have been too old,” he recalled.

“Some probably think that I am already too old to be starting a new business, but I do enjoy fixing things, rolling up the sleeves and getting stuff done. This is the way that I can do that and help people. “

In the regulatory environment of 2021, there are plenty of issues to address.

From implementing the EU Insurance Distribution Directive of 2018 to handling the fallout from Brexit, clients have a range of issues to deal with, and things have become even more complex due to the confusion and uncertainty surrounding the pandemic.

Under scrutiny

The FCA is watching firms more closely than ever, Underhill says, with a focus on being proactive, and speed in dealing with potential breaches.

But alongside that, he notes, firms are more willing to engage with regulation than they may have been previously, recognising that it benefits everyone by improving standards across the industry.

ICSR homes in on the control environment in companies to help deal with complex change issues such as Brexit.

“We focus on the control environment. We look at compliance controls, risk controls, and processes around those. If the regulators are changing the rules, there’s normally a need to change the controls within the business environment of a regulated firm. And that’s what we do,” he explained.

“One of the biggest changes has been the UK’s leaving the EU. You used to be able to trade in Europe from London without anything other than a very simple licence. Everybody had a complete upheaval, and had to set up new companies, new control environments and all of those sorts of things. We were quite engaged in that.

“We get engaged in looking at what I call the plumbing of the organisation and what they need to do, to make sure they’re meeting their risk management and compliance requirements. We also do a lot of work on the governance side.”

With a career stretching three decades Underhill has witnessed a steady rise in the number of regulations that firms operating in 2021 have to grapple with.

While the narrative can often focus on the challenges that this dynamic presents for smaller companies, who can lack the resources to handle a stream of new rules, larger companies are also at risk for the sheer effort it can take to adapt to a new system.

“There are certainly more regulations. Are they more complex? I guess they’re getting deeper into the organisation than perhaps they might have in the past. The general insurance pricing practices are quite intrusive in terms of what they require,” he said.

“They’re not getting more complex but they are becoming more integrated. You can see a pattern where the regulators are interconnecting things more and firms that are able to see those and connect the dots quicker are the ones that can deal with these things more easily.

“Firms that have less complex IT systems find it easier as well. For large firms, a big change in regulation can require a larger upheaval. It’s a lot easier for small firms, it’s often very simple.

“It’s much more complex the larger you are, and it therefore costs more and takes more time to do,” he concluded.

Kenneth Underhill is compliance, risk and corporate governance specialist and director of ICSR. He can be contacted at: kenneth.underhill@icsr.co.uk

Images, from top: Shutterstock / josh.tagi, Hashim Pudiyapura