Solvency II: Income producing real estate loans and internal credit assessments for illiquid, unrated assets

Consultation Paper 23/19
Published on 27 September 2019


This consultation paper (CP) set outs the Prudential Regulation Authority’s (PRA) proposed expectations of firms in respect of their modelling of income producing real estate (IPRE) loans within their Solvency II internal models. It also proposes amendments to its expectations in respect of the use of internal credit assessments for assigning fundamental spreads for illiquid, unrated assets.

The proposals in this CP would result in changes to Supervisory Statement (SS) 3/17, ‘Solvency II: Matching adjustment - illiquid unrated assets and equity release mortgages’ (see Appendix).

The CP is relevant to UK insurance and reinsurance companies holding or intending to hold IPRE loans. It is also relevant to firms investing in illiquid, unrated assets within their Solvency II matching adjustment (MA) portfolios.

Responses and next steps

This consultation closed on Friday 27 December 2019. Please address any comments or enquiries to

The proposals set out 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 European Union take effect.

In the event that the UK leaves the EU with no implementation period in place, the PRA has assessed that the proposals would not need to be amended under the EU (Withdrawal) Act 2018 (EUWA). Please see PS5/19 ‘The Bank of England’s amendments to financial services legislation under the European Union (Withdrawal) Act 2018’ for further details.

The proposed implementation date for the proposals in this CP is Tuesday 31 March 2020. 

PDFConsultation Paper 23/19

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