This consultation paper (CP) sets out proposed changes to the Prudential Regulation Authority’s (PRA's) regulation of UK with-profits insurance business. It consults on changes to the rules which will apply to firms that write with-profits business, and contains a draft supervisory statement which sets out the PRA’s expectations of firms.
CP 22/14 clarifies the PRA’s role and objectives in relation to with-profits business, to take into account:
- changes in the UK regulatory landscape and the framework of coordinated supervision of with-profits business as set out in the with-profits Memorandum of Understanding (MoU) with the Financial Conduct Authority (FCA);
- the new PRA Rulebook, and how this will affect the current designation of with-profits provisions within the existing shared Handbook; and
- the introduction of Solvency II.
This CP is of primary interest to all UK insurance firms that write with-profits business, as well as those with closed with-profits funds. It is relevant to all such firms whether or not they are within the scope of Solvency II.
The FCA is simultaneously publishing feedback statement FS14/1 to set out its conduct approach to regulation of with-profits insurance business, and to provide feedback on responses to the amendments to COBS 20 proposed by the Financial Services Authority (FSA) in CP12/13.
Summary of the proposals covered by the CP
CP22/14 sets out the proposed rule changes necessary to:
- advance the PRA’s objectives;
- address the PRA’s approach to insurance supervision and responsibilities under the with-profits MoU; and
- align the UK’s with-profits regulatory regime with Solvency II, when the Directive comes into effect.
The PRA is proposing to delete all existing PRA designated COBS 20 provisions and replace them with three new rules relevant to the prudential regulation of UK with-profits insurance business. CP22/14 includes an economic cost benefit analysis that considers the impact of the proposed changes.
The PRA views the regulation of with-profits business as an important element of its approach to insurance supervision. The PRA and FCA will continue to liaise on the regulation and supervision of with-profits business according to the framework set out in the with-profits MoU.
Appendices to CP22/14 include proposed changes to the PRA Rulebook and a draft supervisory statement.
This consultation closed on Wednesday 14 January 2015.