Featured Product

    PRA Proposes Amendments to SS3/15 on Loss-Absorbency Mechanism

    October 31, 2018

    PRA published the consultation paper CP27/18, which sets out proposals to amend the supervisory statement (SS3/15) on the quality of capital instruments under Solvency II. The consultation closes on January 02, 2019. The intended implementation date for the final policy, which has been proposed in CP27/18, is February 01, 2019. The purpose of the proposal is to prevent the amount of loss-absorbency provided by restricted Tier 1 own funds (rT1) from being overstated.

    SS3/15 covers the prohibition on redemption of instruments within five years of the date of issue, liability management and capital reduction, principal loss-absorbency mechanism for the restricted Tier 1 instruments, and additional considerations for instruments intended to contribute to group own funds. PRA proposed to update SS3/15 to add an expectation that insurers would deduct the maximum tax charge generated on write-down, when including external rT1 capital instruments that write down on trigger in their own funds. PRA plans to introduce this expectation for the new issuance of rT1 instruments after January 31, 2019. For firms that have already issued external rT1 instruments that write down on trigger, the supervisory team would discuss appropriate arrangements with each firm on a case-by-case basis. 

    This is in the light of the proposed tax changes introduced by HM Revenue and Customs (HMRC) in the Budget on October 29, 2018 pertaining to hybrid instruments. CP27/18 specifically addresses the implications of those proposed tax changes on rT1. CP27/18 is relevant to UK insurance firms within the scope of Solvency II, the Society of Lloyd’s, and firms that are part of a Solvency II group that will determine and classify capital instruments under the Solvency II own funds regime, along with their advisers.

     

    Related Links

    Comment Due Date: January 02, 2019

    Effective Date: February 01, 2019

    Keywords: Europe, UK, Solvency II, Loss Absorbency, rT1, CP27/18, SS3/15, PRA

    Featured Experts
    Related Articles
    News

    FSB Sets Out Effective Practices for Cyber Incident Recovery

    FSB finalized the toolkit of effective practices to assist financial institutions in their cyber incident response and recovery activities.

    October 19, 2020 WebPage Regulatory News
    News

    HKMA Urges Early Action for Adherence to IBOR Fallbacks Protocol

    HKMA urged authorized institutions to take early action to adhere to the IBOR Fallbacks Protocol, which ISDA is expected to publish soon.

    October 16, 2020 WebPage Regulatory News
    News

    FSB Sets Out Roadmap for Transition to Alternative Reference Rates

    FSB published a global transition roadmap for London Inter-bank Offered Rate (LIBOR).

    October 16, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Response to Proposal on BRRD2 Transposition

    HM Treasury published a document that summarizes the responses received from a consultation on the approach of UK to transposition of the revised Bank Resolution and Recovery Directive (BRRD2).

    October 15, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Response to Proposal on CRD5 Transposition

    HM Treasury published the government response to the feedback received on the consultation for updating the prudential regime of UK before the end of the Brexit transition period.

    October 15, 2020 WebPage Regulatory News
    News

    BoE Publishes Reporting Schedule for Statistical Returns

    In a recent statistical notice, BoE announced publication of the reporting schedule for statistical returns for 2021.

    October 15, 2020 WebPage Regulatory News
    News

    EC Welcomes Declaration by Member States on EU Cloud Federation

    EC welcomed the joint declaration by 25 EU member states on building the next generation of cloud in Europe.

    October 15, 2020 WebPage Regulatory News
    News

    MAS Amends Notice on Issuance of Covered Bonds by Banks in Singapore

    MAS published amendments to Notice 648 on the issuance of covered bonds by banks incorporated in Singapore.

    October 15, 2020 WebPage Regulatory News
    News

    FDIC Selects Technology Companies for Rapid Prototyping Competition

    FDIC has selected 14 technology companies—including Accenture Federal Services, LLC, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the next phase of the rapid prototyping competition.

    October 15, 2020 WebPage Regulatory News
    News

    GLEIF Defines New Validation Agent Role for Financial Institutions

    GLEIF announced that financial institutions worldwide can realize a variety of cost, efficiency, and customer experience benefits by assuming a new “validation agent” role within the Global Legal Entity Identifier (LEI) System.

    October 15, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5979