Solvency II: Group availability of subordinated liabilities and preference shares

Consultation Paper 16/19
Published on 22 July 2019

Overview

In this consultation paper (CP), the Prudential Regulation Authority (PRA) sets out its proposed approach to the determination of the availability of subordinated liabilities and preference shares in group own funds, and its expectations of firms in presenting relevant analysis to the PRA. The Appendix sets out proposed amendments to Supervisory Statement (SS) 9/15 ‘Solvency II: Group supervision’ to reflect the proposed approach.

This CP is relevant to all insurance firms within the scope of group supervision under the Solvency II Directive and to the Society of Lloyd’s.

Background

In March 2015, the PRA published SS3/15 ‘Solvency II: the quality of capital instruments’ which clarified the PRA’s expectations of the quality of capital instruments, including instruments intended to count towards group own funds.

In July 2018, the PRA published CP15/18 ‘Solvency II: Group own funds availability’ which set out the PRA’s proposed approach to the determination of the availability of group own funds and its expectations of firms in presenting relevant analysis to the PRA. The PRA’s consideration of responses to the CP were set out in Policy Statement 9/19 ‘Solvency II: Group own funds availability’, and included in an updated version of SS9/15.

Further to these publications, the proposals in this CP would clarify the PRA’s expectations of firms seeking to demonstrate that the Solvency II assumption that subordinated liabilities and preference shares are not available to meet losses elsewhere in the group is inappropriate in a firm’s specific case.

Responses and next steps

This consultation closed on Monday 21 October 2019. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP16_19@bankofengland.co.uk.

The proposals set out in this CP have been designed in the context of the current UK and EU regulatory framework. The PRA has assessed that the proposals will not be affected in the event that the UK leaves the EU with no implementation period in place.

Implementation

The PRA intends that the proposals in this CP would take effect on publication of the final policy. The proposals would not apply to determinations of availability the PRA has previously made.

PDF Consultation Paper 16/19

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