Featured Product

    PRA Proposals on EVT for Equity Release Mortgages Under Solvency II

    April 03, 2019

    PRA proposed (CP7/19) amendments to its expectations from firms investing in equity release mortgage portfolios. These amendments are related to Chapter 3 of the supervisory statement SS3/17 on matching adjustment under Solvency II and have been set out in the Appendix to CP7/19. The proposals aim to provide additional clarity on how PRA expects firms to conduct the Effective Value Test (EVT). The consultation closes on July 03, 2019 while the proposed implementation date for these amendments is December 31, 2019. Also published was a letter—from David Rule, the Executive Director of Insurance Supervision—highlighting key factors associated with the consultation.

    CP7/19 is relevant to the insurance and reinsurance companies holding equity release mortgages. SS3/17 presents an EVT to help PRA determine whether firms appear to be taking inappropriately large matching adjustment benefit from the restructured equity release mortgage held within the matching adjustment portfolios. Earlier, in December 2018, PRA had revised SS3/17 to clarify its expectations about how firms could perform the EVT, with this policy taking effect from December 31, 2019. The policy statement PS31/18, which was issued alongside the revised SS3/17, noted that PRA would consult in 2019 on additional proposals. CP7/19 is now addressing these proposals, which are on the following topics:

    • Review and update of the deferment rate and volatility parameters
    • Treatment of assets other than equity release mortgages held by the special purpose vehicle used to restructure equity release mortgages
    • Treatment of equity release mortgage loans where the amount of principal and/or accrued interest at a given future date is uncertain
    • Frequency with which EVT would be assessed
    • Principles for assessing equity release mortgage risks in internal model Solvency Capital Requirements

     

    Related Links

    Comment Due Date: July 03, 2019

    Effective Date: December 31, 2019 (Proposed)

    Keywords: Europe, EU, Insurance, Solvency II, Equity Release Mortgage, CP7/19, Matching Adjustments, Effective Value Test, PRA

    Featured Experts
    Related Articles
    News

    PRA Proposes Changes to Consolidated Prudential Rules Under CRD5/CRR2

    PRA proposed rules (in CP12/21) for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies that have been approved or designated in accordance with Part 12B of the Financial Services and Markets Act 2000 (FSMA).

    June 21, 2021 WebPage Regulatory News
    News

    ECB Extends Leverage Ratio Relief for Banks Until March 2022

    ECB Banking Supervision announced that euro area banks it directly supervises may continue to exclude certain central bank exposures from the leverage ratio until March 2022.

    June 18, 2021 WebPage Regulatory News
    News

    OSFI Consults on Treatment of Credit Valuation Adjustments

    OSFI decided to increase the Domestic Stability Buffer from 1.00% to 2.50% of total risk-weighted assets, with effect from October 31, 2021.

    June 18, 2021 WebPage Regulatory News
    News

    HKMA Requires Banks to Submit Plans for Fintech Adoption

    HKMA is requesting banks to participate in a tech baseline assessment, which forms part of the HKMA Fintech 2025 strategy.

    June 18, 2021 WebPage Regulatory News
    News

    OSFI Consults on Operational Risk Capital Data Management Expectations

    OSFI published two documents to consult on the management of operational risk capital data for institutions required, or for those applying, to use the Basel III standardized approach for operational risk capital in Canada.

    June 18, 2021 WebPage Regulatory News
    News

    NGFS on Addressing Financial Stability Issues from Biodiversity Loss

    The NGFS Study Group on Biodiversity and Financial Stability published a Vision paper exploring the case for action in addressing the financial stability concerns arising from biodiversity loss.

    June 18, 2021 WebPage Regulatory News
    News

    ACPR Publishes CREDITIMMO Version 2.3.0 Taxonomy for Banks

    ACPR published the final version of CREDITIMMO 2.3.0 taxonomy for the decree of October 31, 2021.

    June 18, 2021 WebPage Regulatory News
    News

    EC Prolongs Italian Guarantee Scheme for Non-Performing Loans

    EC, has approved, under the EU State Aid rules, the fourth prolongation of the Italian guarantee scheme to facilitate the securitization of non-performing loans.

    June 18, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Temporary Collateral Easing Measures

    ECB published Guideline 2021/975, which amends Guideline ECB/2014/31, on the additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral.

    June 17, 2021 WebPage Regulatory News
    News

    EIOPA Releases Report on Artificial Intelligence Governance Principles

    EIOPA published a report, from the Consultative Expert Group on Digital Ethics, that sets out artificial intelligence governance principles for an ethical and trustworthy artificial intelligence in the insurance sector in EU.

    June 17, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7128