PRA Publishes PS4/19 on Loss-Absorbency Mechanism Under Solvency II
PRA published a policy statement (PS4/19) that provides feedback on responses to the consultation paper (CP27/18) on adjusting for the reduction of loss absorbency where own fund instruments are taxed on write down under Solvency II. Appendix 1 to PS4/19 contains the final policy of PRA on updating the supervisory statement (SS3/15) on quality of capital instruments under Solvency II. Appendix 2 to PS4/19 includes a reporting clarification on how the adjustments should be reflected in Solvency II reporting templates. The new policy will come into effect for all instruments issued on or after February 21, 2019.
PS4/19 is relevant to UK insurance firms within the scope of Solvency II, the Society of Lloyd’s, and firms that are part of a Solvency II group that will determine and classify capital instruments under the Solvency II own funds regime, together with their advisers. PRA had received six responses to CP27/18. Respondents made a number of observations and requests for clarification which, along with the PRA’s feedback, have been set out in Chapter 2 of PS4/19. Changes to the draft policy have been set out in Chapter 1 of PS4/19. SS3/15 covers the following topics:
- Prohibition on redemption of instruments within five years of the date of issue
- Liability management and capital reduction
- Principal loss‐absorbency mechanism for tier 1 instruments subject to limitation
- Additional considerations for instruments intended to contribute to group own funds
Related Links
Effective Date: February 21, 2019
Keywords: Europe, UK, Insurance, Solvency II, Loss Absorbency, CP27/18, SS3/15, PS4/19, Reporting, PRA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
David Fihrer
Skilled life insurance actuary; subject matter expert on IFRS 17 and source of earnings
Previous Article
FED Paper Describes FLARE, A Top-Down Model for Stress TestingRelated Articles
FINMA Approves Merger of Credit Suisse and UBS
The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
MFSA Sets Out Supervisory Priorities, Issues Reporting Updates
The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023
German Regulators Issue Multiple Reporting Updates for Banks
Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
