On November 21, the PRA issued a consultation paper (CP24/14) on further measures for implementing the Solvency II Directive. The PRA proposes to make changes (as consulted on by the Financial Services Authority in CP12/13) to align its rules with Solvency II and move them to the Solvency II Firms section of the PRA Rulebook. The consultation proposes changes in the following areas:

  • Appointment of actuaries. The proposed rules cover appointment and termination of actuaries and the relationship between firms and their actuaries and between actuaries and the regulator. The purpose of these rules is to ensure that insurers have access to adequate actuarial advice both in valuing liabilities to policyholders and in exercising discretion affecting the interests of with-profits policyholders.
  • Schemes of operation. This chapter sets out proposed changes to the requirements in respect of run-off operations for Solvency II. The rules propose changes to terminology, take account of the proposed rules for the Society of Lloyd’s and UK firms in difficulty, and clarify the level at which information and documentation is to be provided in respect of third country branches.
  • Regulatory reporting national specific templates (NSTs) specific to the Society of Lloyd’s. The proposed templates will ensure that the PRA receives quantitative data that is essential for the effective supervision of participants in the Lloyd’s market after Solvency II implementation. The PRA proposes a requirement for the Society of Lloyd’s to complete NST numbers NS.12 and NS.13 because the nature of the capital structure needs to be reflective in the way in which the PRA applies the requirements of Solvency II to the calculation of the solvency capital requirement and the format of its reporting. NS.13 is required so that the PRA can collect information necessary to assess whether any shortfall in a syndicate’s own funds compared to its reporting point can be met by the Society of Lloyd’s own funds. To ensure a an efficient data collection, the PRA proposes a new rule, 7.3, in the Reporting Part of the draft PRA Rulebook (in CP16/14) requiring the Society of Lloyd’s to submit the Lloyd’s reporting templates to the PRA at the same time as the Society submits its quantitative reporting templates.

CP24/14 also includes five draft supervisory statements which set out the PRA’s expectations of firms, and give further clarity, on:

  • Regulatory reporting exemptions.
  • Regulatory reporting, internal model outputs.
  • ORSA and the ultimate time horizon – non-life firms.
  • The quality of capital instruments.
  • The treatment of pension scheme risk.

The PRA notes that the final Solvency II Regulations (the Delegated Acts and the Implementing Technical Standards) have not yet been adopted. The guidance in CP24/14 is therefore subject to changes depending on the final versions.

Consultation on CP24/14 closes on January 30, 2015. The PRA will publish a Solvency II policy statement with feedback, including the finalised rules and the final supervisory statements, in 2015 Q1.

For further information:

Solvency II: further measures for implementation – CP24/14, 21 November 2014

Transposition of Solvency II: Part 3 – CP16/14, August 2014