This consultation paper (CP) sets out the Prudential Regulation Authority’s (PRA) proposed expectations and guidance relating to auditors’ work on the matching adjustment (MA). The PRA also proposes several new expectations that relate to the communication by auditors on the subject of the MA.
The proposals in this CP would result in changes to Supervisory Statement (SS) 11/16 ‘Solvency II: external audit of, and responsibilities of the governing body in relation to, the public disclosure requirement’ (Appendix 1).
This CP is relevant to UK Solvency II firms (including mutuals) that have approval to make use of the MA, especially those that are subject to an audit requirement in respect of their Solvency and Financial Condition Report (SFCR). The CP is also relevant for the auditors of such organisations and the users of these SFCRs.
The purpose of these proposals is to clarify the current requirements for auditors in relation to the MA and increase transparency on the respective roles of auditors and the PRA. The proposals would set out the PRA’s expectations on the way that auditors should consider the MA as part of their audit work. The proposals would also clarify the scope of the PRA’s approval of the MA.
The PRA proposes that the draft changes to SS11/16 would take effect from Thursday 31 December 2020.
Response and next steps
This consultation closes on Friday 30 October 2020. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP11_20@bankofengland.co.uk.