In this consultation paper (CP) the Prudential Regulation Authority (PRA) proposes a supervisory statement that sets out the PRA’s expectations for the recalculation of the transitional measure on technical provisions (TMTP).
This CP is of interest to all UK insurance firms within the scope of Solvency II and to the Society of Lloyd’s. In particular, it is relevant to firms that have been granted approval to use, or have been considering applying for, the TMTP.
Summary of proposals
The Solvency II Directive allows firms to apply to their supervisory authority for approval to use the TMTP. Under the Directive, recalculation is permitted, at the initiation of either the firm or the PRA:
- every 24 months; or
- more frequently where the risk profile of the firm has materially changed.
The purpose of the draft supervisory statement is to provide clarity on the PRA’s expectations for, and process applicable to, recalculations of this transitional measure. It should be read in conjunction with the Solvency II Firms: Transitional Measures Part of the PRA Rulebook, the rules in the rest of the Solvency II Firms section of the PRA Rulebook, the Solvency II Regulations 2015 (2015/575) and with the European Insurance and Occupational Pensions Authority (EIOPA) Level 3 Guidelines. The draft statement should also be read alongside Supervisory Statement 17/15 ‘Solvency II: transitional measures on risk-free interest rates and technical provisions’ and the ‘Management of the Run-Off of TDTP relief in future years’ section of the Directors’ letter published on 16 September 2015.
This consultation closed on Friday 13 May 2016.