Skip to main content
  • This website sets cookies on your device. To find out more about how we use cookies please refer to our Privacy and Cookie Policy. By continuing to use the site, we’ll assume that you are content for us to set these on your device.
  • Close
Home > Prudential Regulation Authority > Solvency II: consistency of UK generally accepted accounting principles with the Solvency II Directive – SS38/15
 

Solvency II: consistency of UK generally accepted accounting principles with the Solvency II Directive – SS38/15

28 August 2015

​This supervisory statement is addressed to all insurance firms within the scope of Solvency II reporting under UK generally accepted accounting principles (GAAP) rather than using international accounting standards (IFRS).

The statement was subject to public consultation and reflects feedback received by the PRA.  Some comments suggested altering wording and these suggestions have been accepted where clarity would be improved.  There is no change in policy.

The PRA is publishing this statement to expand on its general approach as set out in its Insurance Approach document. By clearly and consistently explaining its views in this area, the PRA seeks to advance its statutory objectives of ensuring the safety and soundness of the firms it regulates, and contributing to securing an appropriate degree of protection for policyholders.

Article 9 of the Solvency II Regulation (EU) 2015/35 (‘the Solvency II Regulation’) contains a derogation (‘the derogation’) 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. This allows firms the option of recognising 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.

Any firm that relies on the derogation will still be expected to apply in full the remaining valuation requirements of the Solvency II Regulation, regardless of whether the UK GAAP provisions are consistent with Article 75 of the Solvency II Directive.

For insurance firms, most of the differences between UK GAAP and international accounting standards relate only to the level of detail which must be disclosed. Since the derogation addresses recognition and valuation of assets and liabilities rather than their disclosure, it is expected to have a limited effect in the United Kingdom.

Supervisory Statement

Solvency II: consistency of UK generally accepted accounting principles with the Solvency II Directive – SS38/15

Share