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Home > Prudential Regulation Authority > Solvency II: consistency of UK generally accepted accounting principles with the Solvency II Directive - CP16/15
 

Solvency II: consistency of UK generally accepted accounting principles with the Solvency II Directive - CP16/15

10 April 2015

​Summary

This consultation paper seeks feedback on a draft supervisory statement which sets out the PRA’s expectations of firms which are considering applying  the derogation within Article 9 (4) of the Commission Delegated Regulation (EU) 2015/35 (‘the Solvency II Regulation’). This derogation permits a firm to value some assets and liabilities using local generally accepted accounting principles (GAAP) if they fulfil some very specific criteria listed in that Article.

The draft statement is relevant for firms within the scope of Solvency II for which annual financial statements and consolidated financial statements (if any) are prepared under UK generally accepted accounting principles.

Background

The Solvency II Regulation contains a derogation for firms within the scope of Solvency II for which annual financial statements and consolidated financial statements (if any) are prepared under UK GAAP. This allows them the option of recognizing and valuing assets and liabilities under UK GAAP for Solvency II purposes if:

  • UK GAAP is consistent with Article 75 of the Solvency II Directive;
  • the valuation method is proportionate to the nature, scale, and complexity inherent in the business of the undertaking; and
  • the process of valuing the assets and liabilities using international accounting standards would impose costs which are disproportionate with respect to the total administrative expenses of the firm.
 
The statement expands on the PRA’s general approach as set out in its Insurance Approach document.
 
Responses
 
This consultation closed on 10 July 2015. Please address any comments or enquiries to CP16_15@bankofengland.co.uk.
 
The PRA will consider the feedback received and will publish the final supervisory statement at a later date.
 
Consultation Paper
 
 
 
Final policy in relation to this consultation is available under related links.
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