PRA published a consultation paper (CP11/19) that sets out its approach to update supervisory statement (SS6/16) on maintenance of the transitional measure on technical provisions (TMTP) under Solvency II. The consultation closes on August 21, 2019. CP11/19 is relevant to UK insurance and reinsurance firms within the scope of Solvency II that have been granted approval to use the TMTP, the Society of Lloyds, and firms that are considering applying to use this transitional measure.
The proposals provide:
- Additional guidance for firms proposing to use a proportionate approach to the TMTP recalculation methodology
- Further clarity on the consistency of Solvency I and Solvency II methodologies
TMTP mitigates changes to the calculation of technical provisions that have been introduced by Solvency II. The starting point for the calculation of TMTP is a comparison of technical provisions calculated under Solvency I Pillar 2 (Individual Capital Adequacy Standards) and under Solvency II. In its response to the Treasury Select Committee’s (TSC) report on Solvency II, PRA recognized the burden of maintaining multiple systems for recalculation of the TMTP and committed to considering the feasibility of simplifying the TMTP calculations. In recognizing that the current operation of the TMTP is overly burdensome for firms, PRA has investigated a range of methodologies to simplify the TMTP recalculations. Furthermore, following responses to CP13/18 and policy statement (PS31/18) on equity release mortgages, PRA has considered the approach to consistency between Solvency I and Solvency II bases set out in SS6/16.
Comment Due Date: August 21, 2019
Keywords: Europe, UK, Insurance, Solvency II, TMTP, Transitional Measure, Reinsurance, Pillar 2, SS6/16, CP11/19, PRA
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