PRA published a letter from David Rule (Executive Director, Insurance Supervision) to the Chairs of the Remuneration Committee of PRA-regulated insurers. The letter clarifies expectations of PRA from firms and Remuneration Committee Chairs in their implementation of the Solvency II remuneration requirements. The remuneration policies and practices of firms drive underwriting decisions, individual behavior, and organizational culture. This letter follows the PRA analysis of implementation by firms to date and highlights areas where firms would like further guidance. Insurers in the scope of the Solvency II regime must comply with requirements when setting remuneration policies and processes.
The key topics covered in the analysis include material risk-takers, variable remuneration, ex-post risk adjustment, and role of the Remuneration Committee. The analysis has concluded that there is a wide range of interpretations of the Solvency II remuneration requirements and that, while firms’ implementation of the rules has improved over time, inconsistencies in their approaches to implementation remain apparent. This is in line with the feedback received in the meetings with Remuneration Committee Chairs, which suggested an appetite for further clarification from PRA to help address these inconsistencies. The letter highlights that PRA will continue to focus on remuneration in the ongoing prudential supervision of firms. PRA will seek to address any inconsistencies in the interpretation of the Solvency II requirements and share any findings that may help to improve firms’ understanding. PRA will consider whether it is appropriate to provide more clarification or guidance for firms.
Related Link: Letter
Keywords: Europe, UK, Insurance, Solvency II, Remuneration Requirements, Operational Risk, Remuneration Committee, PRA
Previous ArticleESRB Updates List of Countercyclical Capital Buffers in July 2019
The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.
The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.
As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.
The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.
The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.
The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.
The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.