PRA Updates SS18/16 on Longevity Risk Transfers Under Solvency II

By Regulatory News

January 09, 2020

Solvency II

PRA published the policy statement PS1/20, which contains an updated version of the supervisory statement SS18/16 on longevity risk transfers under Solvency II and provides feedback to responses to the consultation paper CP3/19 titled "Solvency II: Longevity risk transfers – simplification of pre notification expectations." PS1/20 is relevant to UK firms that fall within the scope of the Solvency II Directive and to the Society of Lloyd’s. This policy will take effect on the publication of PS1/20. From then on, firms will be expected to notify PRA about the new longevity risk transfers according to the text of the revised SS18/16.

Following the publication of PS1/20, Chapter 2 of SS18/16 was updated to reflect the view of PRA that recognizing basis risk is an important component that should be part of the risk appetite of any firm carrying out longevity risk transfers. Additionally, Chapter 3 was updated to differentiate the PRA expectations of pre-notification for transactions that are large and/or complex, with the inclusion of a reporting template to simplify the notification process for transactions that do not fall within this category.

In CP3/19, PRA had proposed to change its expectations for pre-notification of longevity risk transfers and hedge arrangements and to update the key risks arising from longevity risk transfers. PRA had received one response to this consultation paper. The respondent was welcoming of the overall proposals and intention of the consultation. The response highlighted areas where the proposed reporting template may be unclear and expressed reservation about the basis risk being singled out for specific additional focus. After considering the response, PRA has decided to make two clarifications to the draft policy:

Amend the headings used in the reporting template, providing more clarity on how firms should complete them, including explanatory footnotes
Change the phrasing on how firms should include basis risk in their risk assessments of longevity risk transfers

The policy set out in PS1/20 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 the UK regulatory framework, including those arising once any new arrangements with the EU take effect. In the event that the UK leaves the 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.

Related Links

Effective Date: January 09, 2020

Keywords: Europe, UK, Insurance, Solvency II, Longevity Risk Transfers, PS 1/20, CP 3/19, SS 18/16, PRA

Featured Experts

BIS to Expand Central Bank Membership


News APRA Publishes Submission on Fintech and Regtech APRA published its submission, to the Senate Select Committee, on financial technology and regulatory technology. January 21, 2020 WebPage Regulatory News
News ECB Consults on Guideline on Threshold for Credit Obligations Past Due ECB published a draft guideline, along with the frequently asked questions (FAQs), on the definition of the materiality threshold for credit obligations past due for less significant institutions. January 20, 2020 WebPage Regulatory News
News BIS Discusses Role of Central Banks in Addressing Climate Change Risks BIS published a book that reviews ways of addressing the climate change risks within the financial stability mandate of central banks. January 19, 2020 WebPage Regulatory News
News FSB Report Examines Global Nonbank Financial Intermediation Activity FSB published the ninth annual report examining the global non-bank financial intermediation activity. January 19, 2020 WebPage Regulatory News
News OSFI Publishes Instruction Guide on Solvency Information Return OSFI published an instruction guide to assist administrators of pension plans in completing the Solvency Information Return that is required to be filed with OSFI. January 17, 2020 WebPage Regulatory News
News EU Amends IFRS 9 Rule, Changes Concern Interest Rate Benchmark Reforms EU published Regulation 2020/34 regarding the International Accounting Standard (IAS) 39 and International Financial Reporting Standards (IFRS) 7 and 9. January 16, 2020 WebPage Regulatory News
News FDIC and OCC Issue Statement on Heightened Cyber Security Risk In response to the heightened cyber-security risk facing the financial services industry and other critical business sectors, FDIC and OCC issued an interagency statement on heightened cyber-security risk. January 16, 2020 WebPage Regulatory News
News BCRA Updates Regulation on Capital Requirements and Information Regime BCRA updated the rules on minimum capital requirements for financial entities and on certain aspects of the information transparency regime for quarterly and annual supervision. January 16, 2020 WebPage Regulatory News
News BoE and FCA Outline Next Steps for LIBOR Transition in 2020 BoE, FCA, and the Working Group on Sterling Risk-Free Reference Rates (RFRWG) have published a set of documents that outline the LIBOR transition priorities and milestones for 2020. January 16, 2020 WebPage Regulatory News
News BIS to Expand Central Bank Membership BIS is to expand its central bank membership base and to increase collaboration in its work as a forum for international cooperation and as a hub for central banks and other financial authorities. January 14, 2020 WebPage Regulatory News

RESULTS 1 - 10 OF 4511