Prudential Regulation Authority Rulebook

1.1

While the Solvency II (SII) Directive will not come into force until 1 January 2016, the Prudential Regulation Authority (PRA) publishes this statement in April 2014 to enable firms to consider the PRA’s expectations as part of their planning and preparation for the new regime. The PRA expects to receive legal powers to receive, review and make determinations on applications at transposition on 31 March 2015. The PRA acknowledges that further directly applicable regulations or guidelines from the European Insurance and Occupational Pensions Authority (EIOPA) may, in due course, be issued in relation to the areas covered in this statement, and draws firms’ attention to the fact that this statement may be subject to review, and may be withdrawn on or before 31 December 2015.

1.2

This statement expands on the PRA's general approach asset out in its insurance approach document.^[1] As part of the PRA’s preparations for the SII regime, this statement seeks to ensure that general insurers set an adequate level of technical provisions and hold sufficient capital. By clearly and consistently explaining its expectations of firms in relation to the particular areas addressed, the PRA seeks to advance its statutory objectives of ensuring the safety and soundness of the firms it regulates, and contributing to securing an appropriate degree of protection for policyholders. The PRA has considered matters to which it is required to have regard, and it considers that this statement is compatible with the Regulatory Principles.^[2]

1.3

In light of the introduction of a statutory secondary competition objective^[3] for the PRA, it has also considered whether the content of this statement facilitates effective competition in markets for services provided by PRA-authorised persons in carrying on regulated activities. This statement is designed to assist firms to prepare for the implementation of harmonised prudential capital standards under SII. The PRA intends to apply the SII requirements proportionately. The PRA therefore considers the content of this statement to be compatible with the facilitation of effective competition.

1.4

The PRA consulted on the content of this statement in CP7/14.  The PRA received seven responses to the consultation paper.

1.5

Some responses suggested alternative wording to make the statement clearer. Where the PRA considered that the clarity would be improved, these suggestions have been accepted.

1.6

Some responses asked for further information on specific points. Where firms have such queries, these should be taken up with individual firm supervisors.

1.7

Some respondents considered that the expectations set out in the statement were overly burdensome in certain areas. The PRA notes these responses, highlights that the expectations set out were derived directly from the SII requirements and reiterates its intention to apply the requirements in a proportionate manner. This statement sets out the outcomes expected, but does not prescribe any particular way to meet these expectations.