April 11, 2018

PRA published the consultation paper CP8/18 related to the external audit of the public disclosure requirement under Solvency II. CP8/18 sets out the PRA proposal to amend the rule that requires the external audit of parts of the Solvency and Financial Condition Report (SFCR). PRA proposes that any amendments would be effective for financial years ending on, or after, November 15, 2018. Comments are requested by July 11, 2018.

SFCR is the key public disclosure under Solvency II and is intended to enhance transparency and comparability, through the disclosure of essential information on the solvency and financial condition of a firm. PRA estimates that the proposed amendments would remove the SFCR external audit requirement from the end of 2018, for more than 150 smaller UK Solvency II firms (including mutuals) and groups. PRA considers that this change would improve the proportionality of the requirement. PRA developed the proposals in CP8/18 as part of its work on reviewing aspects of the insurance prudential framework, in light of its experience following the implementation of Solvency II in the UK.

PRA first consulted on the requirement for elements of SFCR to be subject to external audit in CP43/15 and CP23/16. Then, it made the rule with effect for financial years ending on or after November 15, 2016. Following the implementation of the rule and the first year of public disclosure, PRA collected quantitative data from UK Solvency II firms on audit costs incurred and met with stakeholders such as audit firms, investors, insurers, and insurance trade bodies. In light of the findings, PRA made the proposals in CP8/18. CP8/18 is relevant for all UK Solvency II firms (including mutuals), auditors, and users of SFCRs. 

 

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Comment Due Date: July 11, 2018

Keywords: Europe, UK, Insurance, Solvency II, SFCR, External Audit, Public Disclosure Requirement, CP8/18, PRA

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