PRA published the policy statement PS21/20 that contains a rule change to increase protection for eligible policyholders of building guarantee policies or BGPs. As part of this amendment, protection will be extended to 100% for protected policyholders of building guarantee policies. PS21/20 amends the Policyholder Protection Part of the PRA Rulebook (Appendix). According to PRA, this instrument may be cited as "PRA Rulebook: Solvency II Firms: Non Solvency II Firms: Non Authorised Persons: FSCS Limit for Building Guarantee Insurance Instrument 2020." The rule change came into effect on October 08, 2020.
PRA is responsible for making rules that govern the operation of the Financial Services Compensation Scheme in relation to deposit-takers and insurers. Rules in relation to insurers are contained in the Policyholder Protection Part of the PRA Rulebook. In certain cases mentioned in the Policyholder Protection 17.2(1)(a), protected policyholders are covered for 100% of any benefit under their contract of general insurance. In all other cases, protected policyholders should receive at least 90% of any benefit under their contract of general insurance. PRA considers that 90% coverage for protected policyholders of a building guarantee policy no longer amounts to an appropriate degree of protection.
PRA defines building guarantee policy as a contract of general insurance providing building guarantee, construction warranty, and/or structural defects cover in relation to newly built, converted, or renovated residential property including, but not limited to, the risk of physical damage and/or defect arising from non-compliance with relevant building or fire regulations or standards. PRA also notes that the ultimate beneficiaries of building guarantee policies have little choice in the selection of their insurer, as the policy is usually provided to property owners by the builder and the policy is transferred to policyholders in onward sales. Under rule changes set out in PS21/20, protection will be extended to 100% for protected policyholders of building guarantee policies.
The policy set out in PS21/20 has been designed in the context of withdrawal of UK from EU and entry into the transition period, during which time UK remains subject to European law. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework at the end of the transition period, including those arising once any new arrangements with EU take effect. PRA has assessed that the policy would not need to be amended under the EU (Withdrawal) Act 2018.
Effective Date: October 08, 2020
Keywords: Europe, UK, Insurance, Solvency II, PRA Rulebook, Policyholder Protection, Building Guarantee Policy, PRA
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
In a response to the questions posed by a member of the European Parliament, the President Christine Lagarde highlighted the commitment of the European Central Bank (ECB) to an ambitious climate-related action plan along with a roadmap, which was published in July 2021.
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
The French Prudential Control and Resolution Authority (ACPR) published the corrective version of the RUBA taxonomy Version 1.0.1, which will come into force from the decree of January 31, 2022.
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.
The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.
The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).