PRA Statement on Regulatory Changes Impacting Calculation of SCR
PRA published a statement reminding firms that the deferred part of the Delegated Regulation (EU) 2019/981, which was published by EC on June 18, 2019, will come into effect on January 01, 2020. This may impact the calculation of the Solvency Capital Requirement (SCR). Delegated Regulation (EU) 2019/981 amends Delegated Regulation (EU) 2015/35, which supplements the Solvency II Directive (2009/138/EC).
The changes under discussion relate to:
- Standard Formula component loss-absorbing capacity of deferred tax (LACDT)
- Segmentation of non-life insurance and reinsurance obligations
- Standard deviations for the non-life premium and reserve risk sub-module
- Segmentation of Not Similar to Life Techniques (NSLT) health insurance and reinsurance obligations
- Standard deviations for the NSLT health premium and reserve risk sub-module
Among the changes made to LACDT, there will be a requirement that any increases in deferred tax assets after a stress event shall not be included within the calculation of the tax adjustment to the SCR, unless firms are able to demonstrate to the satisfaction of PRA that it is probable that future taxable profit will be available, against which that increase can be utilized (Article 207 2a in the revised delegated regulation). PRA notes that the change to LACDT regulations will also be relevant for firms that use a Partial Internal Model for the SCR, where LACDT is not included within the scope of that model.
Related Links
Effective Date: January 01, 2020
Keywords: Europe, UK, Insurance, Reinsurance, Solvency II, SCR, Loss-Absorbing Capacity, Deferred Tax, Capital Requirements, Regulation 2019/981, Regulation 2015/35, EC, 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
ECB Paper on Implications of Crypto-Assets for Financial StabilityRelated Articles
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
DNB Publishes Multiple Reporting Updates for Banks
DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.
NBB Sets Out Climate Risk Expectations, Issues Reporting Updates
The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting
EBA Updates Address Securitization Standards and DGS Guidelines
The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.
FSB Publishes Letter to G20, Sets Out Work Priorities for 2023
The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023
ISSB Standards May Become Effective from January 2024
The International Organization of Securities Commissions (IOSCO) welcomed the confirmation statement by the International Sustainability Standards Board (ISSB) setting out its progress in the development of its first sustainability-related corporate disclosure standards.
