Prudential Regulation Authority Rulebook

1.1

Unless otherwise stated, this Part applies to:

1. (1) a UK Solvency II firm; and
2. (2) in accordance with Insurance General Application 3, the Society, as modified by 6.

2.1

A firm must have procedures in place to identify deteriorating financial conditions and must immediately notify the PRA when such deterioration occurs.

[Note: Art. 136 of the Solvency II Directive]

3.1

A firm must:

1. (1) immediately inform the PRA as soon as it observes that the SCR is no longer complied with, or where there is a risk of non-compliance within the next three months;
2. (2) within two months from the observation of non-compliance with the SCR, submit a realistic recovery plan for approval by the PRA; and
3. (3) take the measures necessary to achieve, within six months (or such longer period as the PRA may determine) from the observation of non-compliance with the SCR, the re-establishment of the level of eligible own funds covering the SCR or the reduction of its risk profile to ensure compliance with the SCR.

[Note: Art. 138(1)–(3) of the Solvency II Directive]

3.2

If the PRA has extended the period referred to in 3.1(3), by reason of the declaration by EIOPA of exceptional adverse situations affecting the firm, the firm must submit a progress report to the PRA every three months setting out the measures taken and the progress made to re-establish the level of eligible own funds covering the SCR or to reduce its risk profile to ensure compliance with the SCR.

[Note: Art. 138(4) of the Solvency II Directive]

4.1

A firm must:

1. (1) inform the PRA immediately where it observes that the MCR is no longer complied with or where there is a risk of non-compliance within the next three months; and
2. (2) within one month from the observation of non-compliance with the MCR, submit, for approval by the PRA, a short-term realistic finance scheme to restore, within three months of that observation, the reestablishment of eligible own funds at least to the level of the MCR or to reduce its risk profile to ensure compliance with the MCR.

[Note: Art. 139(1), (2) of the Solvency II Directive]

5.1

Any recovery plan or finance scheme must at least include particulars or evidence concerning the following:

1. (1) estimates of management expenses, in particular current general expenses and commissions;
2. (2) estimates of income and expenditure in respect of direct business, reinsurance acceptances and reinsurance cessions;
3. (3) a forecast balance sheet;
4. (4) estimates of the financial resources intended to cover the technical provisions and the SCR and the MCR; and
5. (5) the firm’s overall reinsurance policy.

[Note: Art. 142(1) of the Solvency II Directive]

6.1

For the purposes of this Part, 3 and 5 shall apply to the Society such that a breach of the central requirement shall also be treated as a breach of the SCR.