PRA published the policy statement PS21/20 that contains a rule change to increase protection for eligible policyholders of building guarantee policies or BGPs. As part of this amendment, protection will be extended to 100% for protected policyholders of building guarantee policies. PS21/20 amends the Policyholder Protection Part of the PRA Rulebook (Appendix). According to PRA, this instrument may be cited as "PRA Rulebook: Solvency II Firms: Non Solvency II Firms: Non Authorised Persons: FSCS Limit for Building Guarantee Insurance Instrument 2020." The rule change came into effect on October 08, 2020.
PRA is responsible for making rules that govern the operation of the Financial Services Compensation Scheme in relation to deposit-takers and insurers. Rules in relation to insurers are contained in the Policyholder Protection Part of the PRA Rulebook. In certain cases mentioned in the Policyholder Protection 17.2(1)(a), protected policyholders are covered for 100% of any benefit under their contract of general insurance. In all other cases, protected policyholders should receive at least 90% of any benefit under their contract of general insurance. PRA considers that 90% coverage for protected policyholders of a building guarantee policy no longer amounts to an appropriate degree of protection.
PRA defines building guarantee policy as a contract of general insurance providing building guarantee, construction warranty, and/or structural defects cover in relation to newly built, converted, or renovated residential property including, but not limited to, the risk of physical damage and/or defect arising from non-compliance with relevant building or fire regulations or standards. PRA also notes that the ultimate beneficiaries of building guarantee policies have little choice in the selection of their insurer, as the policy is usually provided to property owners by the builder and the policy is transferred to policyholders in onward sales. Under rule changes set out in PS21/20, protection will be extended to 100% for protected policyholders of building guarantee policies.
The policy set out in PS21/20 has been designed in the context of withdrawal of UK from EU and entry into the transition period, during which time UK remains subject to European law. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework at the end of the transition period, including those arising once any new arrangements with EU take effect. PRA has assessed that the policy would not need to be amended under the EU (Withdrawal) Act 2018.
Effective Date: October 08, 2020
Keywords: Europe, UK, Insurance, Solvency II, PRA Rulebook, Policyholder Protection, Building Guarantee Policy, PRA
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.
The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.
The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.