In this consultation paper (CP), the Prudential Regulation Authority (PRA) sets out its proposed expectations for investment by firms in accordance with the Prudent Person Principle (PPP) as set out in Chapters 2 to 5 of the Investments Part of the PRA Rulebook (which transpose Article 132 of the Solvency II Directive (2009/138/EC) (‘Solvency II’)).
In accordance with Solvency II, the PRA rules require that ‘as regards investment risk, a firm must demonstrate that it complies with the Investments Part of the PRA Rulebook.’ In the scope of the Solvency II supervisory review process, the PRA’s supervision of firms includes reviewing and evaluating firms’ compliance with (among other matters) the PRA rules transposing the Solvency II prudent person investment requirements. The draft Supervisory Statement (SS) (see appendix) sets out the PRA’s proposed expectations of firms relating to the PPP as set out in Investments Chapters 2 to 5 of the PRA Rulebook.
The proposals are relevant to all UK Solvency II firms (including in the context of provisions relating to Solvency II groups), mutuals, third-country branches, the Society of Lloyd’s (the Society) and its managing agents (collectively, ‘firms’).
Responses and next steps
This consultation closes on Wednesday 18 December 2019. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP22_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 be affected in the event that the UK leaves the EU with no implementation period in place. The draft SS attached to this CP should be read in conjunction with SS1/19 ‘Non-binding PRA materials: The PRA’s approach after the UK’s withdrawal from the EU’.
The PRA proposes that the expectations in the draft SS would apply from the date of final publication.