This Consultation Paper (CP) sets out the Prudential Regulation Authority’s (PRA) proposed updates to its approach to insurance business transfers, to reflect legislative changes following the UK’s withdrawal from the European Union and the completion of the transition period. It also provides additional guidance for independent experts and firms on the PRA’s expectations.
The proposals in this CP would result in changes to the Statement of Policy (SoP) ‘The Prudential Regulation Authority’s approach to insurance business transfers’ (Appendix 1).
The CP is relevant to all PRA-authorised insurers, including the Society of Lloyd’s and its managing agents. It is also relevant to mutuals and friendly societies.
The purpose of these proposals is to update the PRA’s approach following legislative changes after the completion of the transition period, and to provide a greater degree of clarity on the PRA’s expectations of firms and independent experts with regard to transfers undertaken under Part VII of the Financial Services and Markets Act 2000 (FSMA), and on its approach transfers undertaken under the Friendly Societies Act 1992 (FS Act 1992).
The PRA has considered the interaction between its primary and secondary objectives and the ‘have regards’. Overall, the PRA considers the proposals should help advance firms’ safety and soundness and to secure an appropriate degree of policyholder protection by providing greater clarity to firms and independent experts with regard to the PRA’s expectations when assessing insurance business transfers, enabling the PRA’s review to be more efficient.
The proposals in this CP relate to the PRA’s approach to insurance business transfers. By providing a greater degree of clarity and transparency with regard to the PRA’s approach and existing practices, the proposals would assist firms and independent experts (IEs) in the preparation of documents and will allow the PRA’s assessment of transfers to be more efficient, as risks would be mitigated sooner. Therefore, the PRA considers that the proposals set out in this CP advance its objectives. Costs for firms in implementing the proposals are expected to be minimal in the majority of instances; most proposals are clarifications of existing PRA expectations, to which firms already largely adhere. Where proposals would create additional costs for firms, the PRA considers that the benefits of mitigating risks to its objectives outweigh any additional costs incurred.
The PRA proposes that the implementation date for the changes resulting from this CP would be Monday 29 November 2021.
Responses and next steps
This consultation closes on Thursday 28 October 2021. The PRA invites responses on the proposals set out in this consultation. Please address any comments or enquiries to CP16_21@bankofengland.co.uk.
References related to the UK’s membership of the EU in the SoP covered by this CP have been updated as part of these proposals to reflect the UK’s withdrawal from the EU. Unless otherwise stated, any references to EU or EU derived legislation refer to the version of that legislation which forms part of retained EU law.