Maintenance of the 'transitional measure on technical provisions' under Solvency II

Policy Statement 11/17 | Consultation Paper 47/16

Published on 28 April 2017

Maintenance of the ‘transitional measure on technical provisions’ under Solvency II – PS11/17

This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback on responses to Consultation Paper (CP) 47/16 ‘Maintenance of the ‘transitional measure on technical provisions’ under Solvency II’. The PS also contains an updated Supervisory Statement (SS) 6/16.

This PS sets out final policy intended to clarify the PRA’s expectations for maintaining the calculation of the transitional measure on technical provisions (‘TMTP’) both at outset and over the transitional period.

This statement is relevant to all UK insurance firms within the scope of Solvency II and to the Society of Lloyd’s. It is particularly relevant to firms that have been granted approval to use the TMTP, or those considering applying to use this transitional measure.

In CP47/16, the PRA proposed amending SS6/16 ‘Recalculation of the ‘transitional measure on technical provisions’ under Solvency II’ to include the PRA’s expectations:

  • that changes in best estimate assumptions used to calculate Solvency II technical provisions should, where applicable, be reflected consistently in the Solvency I Pillar 1 and Pillar 2 bases;
  • that firms should analyse the material components and drivers of the TMTP benefit to facilitate better risk management; and
  • on the role of firms’ audit committees in ensuring that the TMTP claimed continues to meet the conditions for approval.

Feedback on consultation responses

The PRA has made changes to the draft SS6/16 after considering responses to the consultation and further analysis. Details of the changes are included in Chapters 2 and 3 respectively. The PRA does not consider the impact of the changes to be significant. 

PDFPolicy Statement 11/17

Appendix

Supervisory Statement 6/16 UPDATE


Published on 15 December 2016

Maintenance of the ‘transitional measure on technical provisions’ under Solvency II - CP47/16

This consultation paper (CP) sets out the Prudential Regulation Authority’s (PRA) proposed updates to Supervisory Statement (SS) 6/16 ‘Recalculation of the ‘transitional measure on technical provisions’ under Solvency II’. The purpose of the proposal is to clarify the PRA’s expectations for maintaining the calculation of the Transitional Measure on Technical Provisions (‘TMTP’) both at outset and over the transitional period.

This CP is relevant to life insurance and reinsurance companies using or intending to use TMTP.

Summary of proposals

This CP sets out the PRA’s expectations as to how the Solvency I comparator used for the calculation of the TMTP should continue to be maintained over time. The PRA is proposing that changes in best estimate assumptions used to calculate Solvency II technical provisions should, where applicable, be reflected consistently in the Solvency I Pillar 1 and Pillar 2 bases.

The PRA is also making proposals in respect of the:

  • need for firms to analyse the material components and drivers of the TMTP benefit in order to facilitate better risk management, and
  • role of firms’ Audit Committees in ensuring that the TMTP claimed continues to meet the conditions for approval.

The proposals set out are not solely related to the recalculation of the transitional relief, and hence the title of the SS6/16 has been amended to reflect this.

Responses

This consultation closes on Wednesday 15 March 2017.

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