Update 16 February 2017
This supervisory statement sets out the Prudential Regulation Authority’s (PRA) expectations of firms, and provides further clarity on the information to be reported by firms using an internal model to calculate the solvency capital requirement (SCR). This statement is of interest to UK insurance firms within the scope of Solvency II and to the Society of Lloyd’s in respect of each of their syndicates and in respect of outputs of the Lloyd’s internal model.
In forming supervisory judgements, the PRA draws on a broad set of quantitative and qualitative information to promote the safety and soundness of the firms it regulates, and to contribute to the securing of an appropriate degree of protection for policyholders.
Response to feedback to Consultation Paper (CP) 31/16
The updates to this statement and accompanying templates and LOG file was consulted on in Consultation Paper (CP) 31/16 ‘Updates to SS25/15 and SS26/15’.
CP31/16 included updates to the supervisory statement in appendix 1, the templates in appendix 3 and LOG file in appendix 4.
The PRA received two responses. The responses were not directly in relation to the specific proposals outlined within the CP. However, the PRA has made amendments to the updates to the supervisory statements to:
- Clarify within the LOG file:
- A conflict between the template and instructions on business plan loss ratios by Solvency II line of business (LoB), now clearly stating that this information is requested.
- That kurtosis information within the market risk tab is not required.
- All premium measures should be gross of acquisition costs and exclude insurance premium tax.
- The instructions for PRE101, PRE102 and RES101, RES102 for columns C201 to C300 apply to template IM.03.02.01 only.
- The instructions for business plan loss ratio - gross and net for premium risk apply to PRE209 / C101, C201 to C300 and C401 to C416.
- The general comments for market risk apply to rows MKT101 to MK110, columns C201 to C201, C205 to C221, C301.
- The output distribution to be reported for MKT301 is of the modelled annual return on a portfolio of equities (as opposed to an individual equity).
- The risk-free rate referred to within MKT401 to MKT466 is the basic risk-free rate curves used in the calculation of the best estimate of the technical provisions.
- A small number of inconsistencies with template IDs.
- Amend the template to:
- Remove ‘currency used for reporting’ as the LOG file specifically states reporting currency to be GBP.
- Address a number of minor formatting issues within the template, including cell protection, column widths and the number of decimal points to display.
Published on 15 June 2015
This supervisory statement is of interest to UK insurance firms within the scope of Solvency II and to the Society of Lloyd’s in respect of each of their Syndicates and in respect of outputs of the Lloyd’s internal model. It sets out the PRA’s expectations of firms, and provides further clarity on the information to be reported by firms using an internal model to calculate the solvency capital requirement (SCR).
Where a firm uses an internal model, the PRA is required to evaluate ongoing compliance with the Solvency II internal model requirements. To monitor the performance of the approved internal models over time, the PRA expects firms to report the outputs of their approved internal model on an ongoing basis.
SS25/15 contains templates and log files that the PRA expects firms to use when submitting regulatory reports on its internal model outputs, see below.
SS25/15 was consulted on in Solvency II: further measures for implementation - CP24/14, appendix 5.