PRA Finalizes Policy on Group Own Funds Availability Under Solvency II
PRA finalized the policy statement PS10/20 on the approach to determination of the availability of subordinated liabilities and preference shares in group own funds under Solvency II. PS10/20 contains the final policy in an updated version of the supervisory statement SS9/15 on group supervision as well as the feedback to responses received to the consultation paper CP16/19. PS10/20 is relevant to all insurance firms within the scope of group supervision under the Solvency II Directive and to the Society of Lloyd’s. The final policy took effect on April 30, 2020, which is the publication date of PS10/20.
SS9/15 sets out the expectations in respect of the Solvency II groups provisions. SS9/15 should be read in conjunction with the relevant European legislation, the Group Supervision Part of PRA Rulebook, the Solvency II Regulations 2015, and the PRA insurance approach document. The key changes in SS9/15 relate to Chapters 5A and 5B, which address availability of group own funds and regulatory determination on the availability of group own funds. Overall, the SS9/15 explains requirements regarding the following topics:
- Entities excluded from the scope of group supervision
- Choice of calculation method
- Group capital add-on
- Availability of group own funds and regulatory determination on the availability of group own funds
- Single own risk and solvency assessment report
- Single solvency and financial condition report
- Responsibilities of the relevant insurance group undertaking
- Supervision in the absence of third-country equivalence
The policy set out in PS10/20 has been designed in the context of the UK’s withdrawal from the European Union and entry into the transition period, during which time the 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 the European Union take effect.
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Effective Date: April 30, 2020
Keywords: Europe, UK, Insurance, SS9/15, PS10/20, CP16/19, Solvency II, Group Supervision, PRA Rulebook, SFCR, SCR, Own Funds, PRA
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