PRA Publishes Final Policy on Maintenance of TMTP Under Solvency II
PRA published the policy statement (PS25/19) that contains the final supervisory statement (SS6/16) on maintenance of the transitional measure on technical provisions (TMTPs) under Solvency II. The final policy is intended to provide further clarity on the consistency of Solvency I and Solvency II methodologies, in addition to the additional guidance for firms seeking to simplify the recalculation methodology of TMTPs. The expectations that have been set out in SS6/16 come into effect on November 14, 2019, which is also the publication date for PS25/19.
PS25/19 also provides feedback to responses to the consultation paper CP11/19, which had proposed to update SS6/16. PRA has received six responses to this consultation. A number of respondents considered the proposal limiting firms’ making changes to their Solvency I methodology to be unduly restrictive. Additionally, respondents generally welcomed the additional guidance for firms proposing to use proportionate approaches to the TMTP recalculation methodology. After considering the responses, PRA has made the following key changes to the draft policy:
- New text to acknowledge that the distinction between a methodology and assumption change may rely on judgment (paragraph 3.2 of SS6/16)
- A new paragraph providing additional clarity on PRA expectations for firms using a simplified methodology for TMTP recalculation (paragraph 4.18E of SS6/16)
The policy set out in PS25/19 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 UK regulatory framework, including those arising once any new arrangements with EU take effect. In the event that UK leaves 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, also known as EUWA.
Related Links
Effective Date: November 14, 2019
Keywords: Europe, UK, Insurance, Reinsurance, Pillar 2, Solvency II, TMTP, Transitional Measure, PS25/19, SS6/16, CP11/19, PRA
Featured Experts
Adam Koursaris
Asset and liability management expert; capable modeler; risk and capital specialist
Cassandra Hannibal
Life insurance actuary; risk management and economic capital specialist
Jerome Ogrodzki
Insurance asset and liabilities modeling specialist; stochastic modeling expert
Previous Article
IMF Publishes Reports on 2019 Article IV Consultation with HungaryRelated Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BCBS Issues Climate Risk Principles while HKMA Expresses Its Support
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.
