Solvency II: Adjusting for the reduction of loss absorbency where own fund instruments are taxed on write down

Consultation Paper 27/18
Published on 31 October 2018


In this consultation paper (CP), the Prudential Regulation Authority (PRA) sets out its proposals to amend Supervisory Statement (SS) 3/15 ‘Solvency II: the quality of capital instruments’. It proposes an expectation that insurers will deduct the maximum tax charge generated on write-down, when including items listed in Articles 69(a)(iii) and (b) of the Solvency II Regulation (the ‘Solvency II Regulation’) or certain items approved under Article 79 of the Solvency II Regulation to be recognised as restricted Tier 1 own funds (rT1) in their own funds. 

This is in the light of the proposed tax changes introduced by HMRC in the Budget on Monday 29 October 2018 pertaining to hybrid instruments. The CP specifically addresses the implications of those proposed tax changes on rT1.

The CP is relevant to UK insurance firms within the scope of Solvency II, the Society of Lloyd’s, and firms that are part of a Solvency II group that will determine and classify capital instruments under the Solvency II own funds regime, together with their advisors.


The intended implementation date for the final policy following this CP is Friday 1 February 2019. 

Responses and next steps

This consultation closed on Wednesday 2 January 2019, the short consultation period being necessary to provide certainty as soon as possible to firms considering issuing rT1 instruments. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to

PDFConsultation Paper 27/18

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