PRA Publishes Final Policy on Maintenance of TMTP Under Solvency II
PRA published the policy statement (PS25/19) that contains the final supervisory statement (SS6/16) on maintenance of the transitional measure on technical provisions (TMTPs) under Solvency II. The final policy is intended to provide further clarity on the consistency of Solvency I and Solvency II methodologies, in addition to the additional guidance for firms seeking to simplify the recalculation methodology of TMTPs. The expectations that have been set out in SS6/16 come into effect on November 14, 2019, which is also the publication date for PS25/19.
PS25/19 also provides feedback to responses to the consultation paper CP11/19, which had proposed to update SS6/16. PRA has received six responses to this consultation. A number of respondents considered the proposal limiting firms’ making changes to their Solvency I methodology to be unduly restrictive. Additionally, respondents generally welcomed the additional guidance for firms proposing to use proportionate approaches to the TMTP recalculation methodology. After considering the responses, PRA has made the following key changes to the draft policy:
- New text to acknowledge that the distinction between a methodology and assumption change may rely on judgment (paragraph 3.2 of SS6/16)
- A new paragraph providing additional clarity on PRA expectations for firms using a simplified methodology for TMTP recalculation (paragraph 4.18E of SS6/16)
The policy set out in PS25/19 has been designed in the context of the current UK and EU regulatory framework. PRA will keep the policy under review to assess whether any changes would be required due to changes in UK regulatory framework, including those arising once any new arrangements with EU take effect. In the event that UK leaves EU with no implementation period in place, PRA has assessed that the policy would not need to be amended under the EU (Withdrawal) Act 2018, also known as EUWA.
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Effective Date: November 14, 2019
Keywords: Europe, UK, Insurance, Reinsurance, Pillar 2, Solvency II, TMTP, Transitional Measure, PS25/19, SS6/16, CP11/19, PRA
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