The Prudential Regulation Authority (PRA), part of the Bank of England, was given new duties in 2013 in respect of insurers. Specifically, the PRA was given responsibility for the prudential supervision of all authorised insurers in the United Kingdom — the first time in the Bank’s 320-year history that it had been responsible for insurance oversight. The PRA’s statutory insurance responsibilities include the need to contribute to the securing of an appropriate degree of protection for policyholders. This was a new requirement for the Bank, and one that, when combined with the PRA’s broader responsibilities, has few direct parallels among regulators elsewhere.
The Court of the Bank of England (the Bank’s Board) has wide-ranging oversight responsibilities with respect to the Bank, including the PRA. And Court wants to ensure that the PRA is taking an appropriate approach to what Court Directors consider to be an important part of its remit. In April 2016, Court therefore commissioned its Independent Evaluation Office (IEO) to assess the PRA’s approach to its policyholder protection duties.
The overarching theme of this report is that there is more to do to articulate the PRA’s approach to its Insurance Objective. But it is important to note that the IEO have found no evidence to suggest that the PRA is falling short of — or stepping beyond — its policyholder protection responsibilities. Indeed, the IEO have found clear evidence, from multiple sources and in a wide range of settings, of supervisors taking meaningful and appropriate actions to advance policyholder protection. Rather, the question is one of consistency, of ensuring that supervisory practices are aligned with the PRC’s preferred approach, of allocating resource efficiently and of mitigating any risk of overreach.
The IEO’s recommendations fall into four categories — articulating more fully the PRA’s approach to its Insurance Objective, communicating this articulation clearly, implementing the preferred approach effectively and enhancing the PRA’s framework for co-ordination with the FCA.