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Home > Prudential Regulation Authority > Solvency II: Remuneration requirements - CP13/16
 

Solvency II: Remuneration requirements - CP13/16

07 April 2016

Overview

This consultation paper (CP) seeks feedback on a draft supervisory statement which sets out the Prudential Regulation Authority’s (PRA) expectations with regards to Article 275 of the Commission Delegated Regulation (EU) 2015/35 (‘the Solvency II Regulation’).

This consultation is relevant to all UK insurance and reinsurance firms and groups within the scope of Solvency II including the Society of Lloyd’s and managing agents (‘Solvency II firms’).

Summary of proposals

From 1 January 2016, the remuneration requirements in the Solvency II Regulation became directly applicable to Solvency II firms. National Competent Authorities are expected to ensure that Solvency II firms are compliant. The PRA intends to monitor compliance with the regulatory requirements in the same way that it does for PRA rules.

The supervisory statement clarifies PRA expectations of how Solvency II firms should comply with the key Solvency II remuneration requirements such as identification of Solvency II staff (Article 275(1)(d)), deferral (Article 275(2)(c)), and performance measurement (Article 275(2)(b), (d) and (e)). The purpose of this statement is to ensure that the regulatory requirements are interpreted correctly and applied consistently across Solvency II firms with different outcomes due only to differences in the ‘internal organisation of the insurance or reinsurance undertaking, and the nature, scale and complexity of the risks inherent in its business’ (see Article 275(3) of the Solvency II Regulation).

Please note, the expectations set out in the supervisory statement reflect the PRA’s expectations at the time of writing and may be subject to change. For example, the Bank of England and Financial Services Bill proposes to introduce provisions in the Financial Services and Markets Act 2000 (FSMA) that would extend the Senior Managers and Certification Regime to insurers. Assuming the Bill receives Royal Assent, the PRA will need to consult. This particular issue is not the subject of this consultation paper and will be covered in a separate consultation later this year.

The PRA has engaged with the Financial Conduct Authority (FCA) on this draft supervisory statement.

A reporting template for PRA Category 1 and 2 firms to use for the 2016 performance year to demonstrate compliance with the requirements is included as an appendix in the consultation paper.

Response

This consultation closed on Thursday 2 June 2016. Please address any comments or enquiries to CP13_16@bankofengland.co.uk.

Consultation Paper

Solvency II: Remuneration requirements - CP13/16

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