PRA Practitioner Panel and Insurance Sub-committee – Annual Report 2020/21

1 March 2020 to 28 February 2021
Published on 17 June 2021

Overview

1.1 In 2020/21 the PRA Practitioner Panel (Panel) continued to effectively represent the interest of practitioners by considering and providing appropriate scrutiny on significant PRA policy and regulatory developments which benefit from Panel input. This has been achieved through regular discussions with relevant PRA and wider Bank of England policy leads, senior management, and Prudential Regulatory Committee (PRC) members at Panel meetings.

1.2 The Panel’s established approach of early engagement is central to its ability to add value to the PRA’s approach to policymaking. The Panel is committed to continuing to provide challenge and advice to the PRA, ensuring that practitioners’ views are appropriately considered.

1.3 The Panel has a sub-committee, the Insurance Sub-committee (Sub-committee), which provides a dedicated forum to discuss the PRA’s policies and practices related to the insurance sector. Like the Panel, the Sub-committee follows the approach of early engagement to enable added value to policies. Additionally, information is shared between the Sub-committee and the Panel.

PRA Practitioner Panel

Panel membership as at March 2021:

• Chris Bannister, General Manager, Europe and America, Westpac – UK Finance

• Debbie Crosbie, Chief Executive Officer, TSB Bank – UK Finance

• Mary-Anne Daly, Chief Executive Officer, Cazenove Capital, UK – Personal Investment Managements & Financial Advice Association (PIMFA)

• Martin Fisher, Regulatory and Legal Officer for Northern Ireland, ‎Irish League of Credit Unions – NI Credit Unions

• Tim Harris, Chief Financial Officer, Direct Line Group – Association of British Insurers

• Aki Hussain, Chief Financial Officer, Hiscox – Association of British Insurers

• Robert Kelly, Chief Executive Officer, Association of British Credit Unions Limited (ABCUL) – Mainland UK Credit Unions

• Francesca McDonagh, Chief Executive, Bank of Ireland Group – UK Finance

• Andy Nelson, Chief Financial Risk and Data Officer, Skipton Building Society – Building Societies Association

• Ruairi O’Healai, Managing Director, Morgan Stanley Investment Management – The Investment Association

• Helen Pickford, UK Chief Financial Officer, Zurich UK – Association of British Insurers (Practitioner Panel Chair)

• Mark Rhys, Banking Partner, Deloitte – The Institute of Chartered Accountants in England and Wales (ICAEW)/ The Institute of Chartered Accountants of Scotland (ICAS)

• William Smith, Managing Director, Head of International, Capital Markets, BMO Capital Markets – Association of Foreign Banks

• Victoria Stubbs, Chief Risk Officer, The Cambridge Building Society – Building Societies Association (Practitioner Panel Deputy Chair)

2.1 As outlined in the Panel’s Terms of Reference,footnote [1] members serve for a three-year term with the opportunity of extending this for an additional term. Victoria Stubbs, William Smith, Mary-Anne Daly and Martin Fisher all began second terms; William Smith’s second term is scheduled to end in October 2023, Victoria Stubbs’ and Mary-Anne Daly’s in November 2023, and Martin Fisher’s in May 2024.

2.2 During 2020, James Bardrick’s term came to an end. Chris Bannister replaced James Bardrick with a membership effective from September 2020 to September 2023.

2.3 Helen Pickford and Victoria Stubbs have continued as Panel Chair and Deputy Panel Chair.

Panel engagement with the PRA

2.4 The Panel met four times during the reporting period.footnote [2] All meetings this year have taken place via teleconference.

2.5 As in prior years, Panel members were provided with briefings from, and had discussions with, relevant PRA policy leads. Meetings were attended by Executive Directors from the PRA and policy area of the Bank of England, as well as the PRA Chief Executive Officer (CEO) on some occasions. Key outcomes and insights from these meetings continue to be fed back to relevant decision makers and policy leads within the PRA and the Bank of England, contributing to the policy making process.

2.6 The PRA CEO continues to hold bilateral meetings to discuss the Panel’s views and other relevant issues with the Panel Chair.

Examples of items considered by the Panel and impact on the PRA

2.7 The following items are examples of where the Panel’s views were sought, and where significant added value to the policy process over the reporting period was provided:

Issue

Description

EU withdrawal preparations

The Panel continued to receive regular updates on the Bank of England’s EU withdrawal preparations, on which it gave feedback on the approach and work ahead of the UK’s exit from the EU and in to the transition period.

Covid-19

The Panel received information on what prudential actions the PRA had taken in response to the Covid-19 situation. The Panel provided feedback on these actions as well as views on what industry would find helpful regarding future actions the PRA may take.

Regulatory Initiatives Grid

The Panel heard information on the Financial Services Regulatory Forum and the Regulatory Initiatives Grid, and discussed ways to make the Grid more effective for industry. The PRA returned to the Panel with an update on this topic in January 2021 and plans to continue to update the Panel periodically as the Grid develops.

Regulatory response to AI and machine learning

The PRA discussed with the Panel the PRA’s initial thinking of the appropriate regulatory response to artificial intelligence and machine learning. The Panel provided examples of work happening in industry as well as areas for the PRA’s work to focus on.

Usability of capital buffers and liquidity coverage ratios

The PRA shared indications with the Panel that banks would be reluctant to use their capital buffers and had been unwilling to allow their liquidity coverage ratios to fall significantly in stress. The Panel provided thoughts on the drivers behind these issues and suggested policy steps that could be taken to encourage buffer use.

HM Treasury consultation on the Future Regulatory Framework

The Panel members were asked their views on the consultation from HM Treasury regarding the post-Brexit framework for financial regulation, and discussed the section of the consultation that asked for feedback on the future role of the PRA and FCA’s statutory panels, such as the Practitioner Panel and the Insurance Sub-committee.

Resolvability Assessment Framework (RAF)

The Panel was given an overview on how the RAF applied to different types of firms, the outcomes that firms within the scope of the RAF must achieve by 2022, the RAF cycle timeline, and RAF disclosures. The Panel provided comments around the timing, firms in and out of scope, and how the RAF would be understood by external bodies.

Panel forward agenda

2.8 The Practitioner Panel is scheduled to meet six times in the 2021/22 reporting period. Whilst Covid-19 restrictions are in place, meetings are being held via teleconference which will be reassessed as restrictions ease. The Forward Agenda will continue to be shaped by Panel members, and the PRA Executive and Senior Management Team. The focus of the agenda will continue to include items that are at an early stage of policy development; however, some topics discussed during the course of the period are expected to return to the agenda as they continue to develop. The agenda will also include any emerging and urgent issues that would benefit from a Panel discussion, as determined by the Panel or at the request of the PRA.

Practitioner Panel Insurance Sub-committee

Sub-committee membership as at March 2021:

• Andrew Chamberlain, Chair of the Actuarial Standards Committee of the International Actuarial Association – Institute and Faculty of Actuaries

• Paul Corver, Director, Insurance & Reinsurance Legacy Association (IRLA) – IRLA

• Angela Darlington, Chief Executive Officer, UK Life Insurance, Aviva – Association of British Insurers

• Neil Griffiths, Chief Risk Officer, Asta – Lloyd’s Market Association

• Tim Harris, Chief Financial Officer, Direct Line Group – Association of British Insurers (Sub-committee Chair)

• Aki Hussain, Chief Financial Officer, Hiscox – Association of British Insurers

• Helen Pickford, UK Chief Financial Officer, Zurich UK – Association of British Insurers

• David Sansom, Chief Risk Officer, Lloyd’s – Lloyd’s

• Stuart Tragheim, Chief Executive Officer, Holloway Friendly – Association of Financial Mutuals

• Vacant (nomination process in progress) – International Underwriting Association

3.1 Aki Hussain joined the Sub-committee, as one of the ABI representatives, with effect from March 2020. David Sansom of Lloyd’s was appointed as a member in May 2020. Tracey Hunt stepped down during the period as the representative of the International Underwriting Association.footnote [3]

Sub-committee engagement with the PRA

3.2 The Sub-committee met twice within the reporting period.footnote [4] Similarly to the Panel, members were provided with briefings from, and had discussions with, relevant policy leads, and meetings were attended by Executive Directors and Directors from the PRA, as well as the PRA CEO on one occasion.

Examples of items considered by the Sub-committee and impact on the PRA

3.3 The following items are examples of where the Sub-committee’s views were sought, and where significant added value to the policy process over the reporting period was provided:

Issue

Description

Operational Resilience and Insurance Supervision

The Sub-committee held a discussion on the PRA’s consultation on operational resilience and how the PRA might assess operational resilience in the future. They considered the combination of reviews that would constitute the assessment, and reflected on the issue of proportionality, as well as their experiences of the Covid-19 situation in relation to operational resilience.

Regulatory Initiatives Grid

The Sub-committee heard information on the Financial Services Regulatory Forum and the Regulatory Initiatives Grid, and discussed ways to make the Grid more effective for the insurance industry. The PRA plans to continue to update the Sub-committee periodically as the Grid develops.

Review of Solvency II

The Sub-committee considered three elements of HM Treasury’s Review of Solvency II: Call for Evidence, which sought industry input on how the current regime could be reformed. The areas of focus were:

  • calculation of the solvency capital requirement;
  • transition of risk free rate from LIBOR to SONIA; and
  • reporting reforms.

The Sub-committee discussed reforms proposed by the PRA, and reflected on the prioritisation and timing aspect of the implementation of any changes.

HM Treasury consultation on the Future Regulatory Framework

The Panel was informed about the consultation from HM Treasury regarding the post-Brexit framework for financial regulation and discussed the section of the consultation that asked for feedback on the future role of the PRA and FCA’s statutory panels, such as the Practitioner Panel and the Insurance Sub-committee.

Sub-committee Forward Agenda

3.4 The Sub-committee is scheduled to meet three times in the 2021/22 reporting period. The Forward Agenda is, and will continue to be, shaped by Sub-committee members, the Prudential Policy Directorate senior management team and the Insurance Supervision senior management team. The focus of the agenda will include items that are at an early stage of policy development.

  1. Available on the Practitioner Panel and Insurance Sub-committee page.

  2. The Panel would normally meet six times a year. The first two meetings of the reporting year were cancelled due to contingency arrangements introduced as a result of the Covid-19 situation.

  3. The nomination process to consider a replacement representative for the International Underwriting Association is underway.

  4. The March 2020 meeting was cancelled due to contingency arrangements introduced as a result of Covid-19. Papers were circulated for comment.

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