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.
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Comment Due Date: February 09, 2018
Keywords: Europe, UK, Insurance, Solvency II, Supervisory Approval, Volatility Adjustment, CP22/17, SS23/15, Reinsurance, PRA
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