PRA Consults on Supervisory Approval for Use of Volatility Adjustment
PRA published consultation paper (CP22/17) on supervisory approval for the use of volatility adjustment under Solvency II. This paper contains the PRA proposals to clarify its expectations from firms seeking approval to apply a volatility adjustment to the insurance and reinsurance businesses. PRA also proposed to update the supervisory statement SS23/15 on supervisory approval for the volatility adjustment under Solvency II. Feedback on the proposals is due by February 09, 2018.
The proposals clarify the risks that may arise from the use of volatility adjustment and the ways firms are expected to consider those risks. In the course of reviewing firms’ volatility adjustment applications, PRA has identified areas of prudential risk that may arise from using the volatility adjustment and that must be addressed during the review process. CP22/17 aims to alert all firms considering applications to use the volatility adjustment to those risks and to help them to produce high-quality applications that successfully address those risks. The proposed updates to SS23/15 should be read in conjunction with the Technical Provisions, Investments, Conditions Governing Business, and Insurance – Senior Insurance Management Functions Parts of the PRA Rulebook; the Solvency 2 Regulations 2015; the Solvency II Regulation (EU Regulation 2015/35); and the EIOPA Level 3 Guidelines.
Related Links
Comment Due Date: February 09, 2018
Keywords: Europe, UK, Insurance, Solvency II, Supervisory Approval, Volatility Adjustment, CP22/17, SS23/15, Reinsurance, PRA
Featured Experts
Paul McCarney
Insurance product strategist; insurance domain expert; extensive experience developing risk assessment frameworks for insurers
Brian Robinson
Actuary; risk management specialist; corporate and capital modelling expert
Previous Article
VP of EC Speaks at EU-Asia Pacific Forum on Financial RegulationRelated Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards