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    PRA Delays Effective Date for Work of Auditors on Matching Adjustment

    December 15, 2020

    PRA announced delay to the proposed effective date set out in paragraph 1.12 of the consultation paper CP11/20, which covers expectations and guidance related to auditors’ work on the matching adjustment under Solvency II. PRA confirmed that any finalized approach will not be effective for audits of the Solvency and Financial Condition Reports, in short SFCRs, with a December 31, 2020 reporting date. The delay to the proposed effective date takes into account feedback from the respondents to CP11/20, including in relation to the impact of COVID-19 shock. Through this communication, PRA intends to provide clarity and certainty for auditors and firms in relation to the audits of December year-end Solvency and Financial Condition Reports.

    The proposals in CP11/20 include clarifications and enhanced transparency on the PRA expectations in respect of auditors’ work on the matching adjustment. CP11/20 also proposes several new expectations that relate to the communication by auditors on the subject of the matching adjustment. The proposals in CP11/20 would result in changes to the supervisory statement SS11/16 on the external audit of, and responsibilities of the governing body in relation to, the public disclosure requirement with reference to Solvency II. CP11/20 is relevant to UK Solvency II firms (including mutuals) that have approval to make use of the matching adjustment, especially those that are subject to an audit requirement in respect of their Solvency and Financial Condition Report. It is also relevant for the auditors of such organizations and the users of these Solvency and Financial Condition Reports. The consultation CP11/20 has now closed and PRA is considering the feedback it has received from respondents to the consultation, before finalizing the policy. Through its guidance, PRA aims to clarify the requirements and expectations for auditors that form a view on the matching adjustment as part of their audit of the Solvency and Financial Condition Report. 

     

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    Keywords: Europe, UK, Insurance, Solvency II, Matching Adjustment, CP11/20, SFCR, Implementation Timeline, External Audit, PRA

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