In this consultation paper (CP), the Prudential Regulation Authority (PRA) seeks feedback on its proposed approach to authorising and supervising third-country insurers that carry on (or are considering carrying on) insurance business in the United Kingdom through a branch or by forming a subsidiary. The purpose of the proposals is to support the interpretation of the PRA Rulebook on third-country branches and to explain the PRA’s policy towards authorising and supervising third-country insurers or those contemplating establishing a branch or subsidiary in the United Kingdom.
The proposals are relevant to all existing and prospective insurance firms carrying out regulated activities, but not headquartered, in the United Kingdom that are not able to benefit from passporting rights. The PRA’s approach to branch supervision for EEA firms that are currently branching into the United Kingdom under the passporting arrangements remains unchanged until the United Kingdom withdraws from the European Union. They would then be treated in the same way as other insurance branches.
At the time of this consultation, the proposals do not apply to Swiss General Insurers, as defined in the PRA Rulebook, to which different requirements apply pursuant to the Swiss Treaty Agreement (No. 91/370/EEC).
The PRA proposes to publish a supervisory statement to set out factors that would be considered relevant when considering authorisation as a third-country branch or a subsidiary (see appendix). Supervisory Statement (SS) 44/15 ‘Solvency II: third-country insurance and pure reinsurance branches’ will remain unchanged.
Summary of Proposals
The PRA proposes new factors to be considered alongside its current requirements for third-country branch authorisation.
When considering applications from a firm for authorisation as a third-country branch, the PRA’s approach is anchored in its statutory objectives and includes an assessment of regulatory equivalence and the supervisability of the insurer that seeks to operate in the United Kingdom through a branch. The PRA already considers, and needs to be satisfied that: the home jurisdiction’s prudential supervision regime is ‘broadly equivalent’; the firm is capable of being supervised effectively by the home supervisor; the whole firm is able to meet the Threshold Conditions; there is sufficient supervisory cooperation with the home supervisor; UK policyholders of the firm will be given the appropriate priority in an insolvency and that there is no discrimination against policyholders whose business is written in the United Kingdom in the event of a winding up; and the firm is able to meet relevant PRA rules, including the Senior Insurance Manager Regime (SIMR) rules applicable to the relevant individuals responsible for the branch.
Responses and next steps
This consultation closes on Tuesday 27 February 2018. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP30_17@bankofengland.co.uk.
The proposals in this CP have been designed in the context of the current UK and EU regulatory framework. The PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework, including those arising once any new arrangements with the EU take effect.