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Home > Prudential Regulation Authority > Solvency II: external audit of the public disclosure requirement – CP23/16
 

Solvency II: external audit of the public disclosure requirement – CP23/16

04 July 2016

​Overview

The PRA consulted on its proposal for external audit of the Solvency II public disclosure in CP43/15. Following feedback, the PRA has made some minor amendments to the rules, though the broad policy approach has not changed. The draft rules and supervisory statement set out in Appendices 1 and 2 include those minor amendments and the PRA’s responses to consultation feedback have been included in Chapter 3. In addition to those minor amendments the PRA proposes a clarification of the duty of care of auditors to the PRA in the proposed rules. While there is no substantive change in the PRA’s policy, and the amendment does not change the substance of what an auditor or actuary must do to comply with the PRA’s rules, the rule has been amended to provide clarity. This consultation paper (CP) seeks views on this proposed clarification.

Summary of proposals

In CP43/15, the PRA set out its proposal for a policy to require the external audit of elements of the disclosure requirement under Solvency II and sought feedback on the proposal. Firms in scope of Solvency II are required to disclose publicly an SFCR. The PRA proposed to require external audit of quantitative and qualitative information included in the ‘Valuation for solvency purposes’ and ‘Capital management’ sections of the SFCR (relevant elements of the SFCR) of insurers prepared at the solo, group and sub group level subject to two exemptions. First, the Solvency Capital Requirement (SCR) would be exempt if calculated using an approved full or partial internal model (internal model). Secondly, where Solvency II requires information in the SFCR to be produced using sectoral rules, that information would not be subject to external audit.

Some respondents were concerned that guidance for auditors would not be available in time for the first disclosure. The PRA has assessed these concerns and has decided that the requirement for external audit of the public disclosure should be deferred and apply to firms with years ending on or after 15 November 2016.

Subject to the changes and clarifications described in Chapter 3, the rules proposed in this CP continue to reflect the proposals in CP43/15. The proposals clarifying the duties of auditors are discussed in Chapter 2.

Responses

This consultation closes on Thursday 4 August 2016. The consultation period has been reduced to one month because the PRA has already consulted on the proposed policy for external audit of the public disclosure requirement, and other than the changes proposed in Chapter 2, is proposing other amendments and clarifications in response to comments received on CP43/15. The PRA invites feedback on the proposal as described in Chapter 2. Please address any comments or enquiries to CP23_16@bankofengland.co.uk.

The PRA will consider the feedback received and will publish a policy statement with the final rules, and a supervisory statement.

Consultation paper

Solvency II: external audit of the public disclosure requirement – CP23/16

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