Prudential regulation

Solvency II: Adjusting for the reduction of loss absorbency – CP 27/18

On 31 October the PRA published a Consultation Paper outlining its proposals to amend its Supervisory Statement (SS 3/15) titled 'Solvency II: the quality of capital instruments'. The CP was produced in the light of the proposed tax changes introduced by HMRC in the Budget of 29 October 2018 pertaining to hybrid capital instruments and aim to prevent the amount of loss-absorbency provided by restricted Tier 1 own funds from being overstated in calculating in a firm’s own funds calculation.

The proposals introduce an expectation for insurers to deduct the minimum tax charge generated on write-down if they are including, in their own funds, items that fall under article 69(a)(iii) and (b) or article 79 of the Solvency II Regulation.

The proposed amendments are included in the appendix to the CP and the intended implementation date for the final policy resulting from the consultation is 1 February 2018. 

Comments must be submitted on or before 2 January 2019.

The PRA’s approach to insurance supervision

On 31 October the PRA released an updated version of its document 'The Prudential Regulation Authority’s approach to insurance supervision'. This document sets out how the PRA advances its objectives in relation to insurers, explains the supervision of insurance institutions, and sets out its expectations. The document contains a number of changes reflecting amendments to legislation and supervisory approach since the previous edition was published in March 2016, and stresses that the PRA's objectives will not change in light of the withdrawal of the UK from the EU. The Annex to the document outlines the key changes.

Strengthening accountability: the extension of the SM&CR to insurers (Part 2) – PS28/18

On 9 November the PRA issued a Policy Statement relating to Consultation Paper (CP) 20/18 "Strengthening accountability: implementing the extension of the SM&CR to insurers (Part 2)" issued in December of 2017.

The CP set out technical and minor administrative amendments regarding the extension of the Senior Managers and Certification Regime (SM&CR) for insurers. Since no responses were received for the CP no changes were made to the final rules. 

The final rules for the extension of the SM&CR for insurers come into effect on 10 December 2018.

Solvency II templates for the disclosure of aggregate statistical data at year-end 2017

On 13 November the PRA published templates A and B as required under Article 31(2) of the Solvency II Directive. The information is accurate for year-end 2017.

These publications supplement the ‘Solvency II: Supervisory disclosures, PRA’s supervisory approach and insurance regulations applicable in the UK year-end 2017’, published on 21 August 2018.

PRA fees and levies: Changes to periodic and transaction fees – CP 28/18

On 14 November the PRA published Consultation Paper 28/18 "PRA fees and levies: Changes to periodic and transaction fees" which aims to ensure that the methodologies for determining PRA fees for designated investment firms (DIFs), life insurers and general insurers are appropriate to the risks these firms pose to the PRA’s objectives.

This consultation paper (CP) sets out the proposals relating to:
 

  • periodic fees for designated investment firms (DIFs); 
  • Part VII transaction fees for insurers;
  • internal model application fees for insurers;
  • internal model application and model maintenance fees for DIFs;
  • rules relating to the provision of relief from PRA fees in exceptional circumstances; 
  • other minor corrections to PRA fees rules;
  • updates to Supervisory Statement (SS) 3/16 ‘Fees: PRA approach and application’.
The proposed implementation date for the proposals contained in this consultation is Friday 1 March 2019. Comments should be submitted on or before 7 January 2019.

charles.portsmouth@moorestephens.com