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

    OCC Revises Minimum Threshold for Banks to Conduct Stress Tests

    OCC issued the final rule that amends its company-run stress testing requirements under the 12 CFR 46 in Code of Federal Regulations.

    October 10, 2019 WebPage Regulatory News
    News

    US Agencies Update Management Interlock Rules Under DIMIA

    US Agencies (FDIC, FED, and OCC) issued a final rule that increases the thresholds in the major assets prohibition for management interlocks for purposes of the Depository Institution Management Interlocks Act (DIMIA).

    October 10, 2019 WebPage Regulatory News
    News

    US Agencies Finalize Rules to Closely Match Bank Risk Profiles

    US Agencies (OCC, FED, and FDIC) finalized rules that tailor the regulations for domestic and foreign banks to more closely match their risk profiles.

    October 10, 2019 WebPage Regulatory News
    News

    CPMI-IOSCO and FSB on Governance Arrangements for OTC Derivatives

    CPMI and IOSCO published a report that identifies key criteria, functions, and bodies for the governance arrangements.

    October 09, 2019 WebPage Regulatory News
    News

    EIOPA Launches Field Test on Templates Under 2020 Solvency II Review

    EIOPA, as part of the 2020 Solvency II reporting and disclosure review, launched a field test on the revised and newly proposed reporting templates.

    October 09, 2019 WebPage Regulatory News
    News

    US Agencies Adopt Rule on Appraisals for Real Estate Transactions

    US Agencies (FDIC, FED, and OCC) adopted the final rule to amend regulations requiring appraisals of real estate for certain transactions

    October 08, 2019 WebPage Regulatory News
    News

    US Agencies Finalize Amendments to Simplify Volcker Rule

    US Agencies (CFTC, FDIC, FED, OCC, and SEC) finalized amendments to the regulations implementing section 13 of the Bank Holding Company Act, also known as the Volcker Rule.

    October 08, 2019 WebPage Regulatory News
    News

    EC Report Explores Application and Challenges of Blockchain Technology

    The Joint Research Center of EC published a report exploring the challenges and impact of distributed ledger technologies.

    October 08, 2019 WebPage Regulatory News
    News

    BIS and SNB Sign Agreement on Innovation Hub Center in Switzerland

    BIS and SNB signed an operational agreement on the BIS Innovation Hub Center in Switzerland.

    October 08, 2019 WebPage Regulatory News
    News

    ECB Issues Results of Sensitivity Analysis of Liquidity Risk for Banks

    ECB published results of 2019 stress test on sensitivity analysis of liquidity risk.

    October 07, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3958