Solvency II Regulations 2015 (the Regulations) provide that firms may apply to the PRA for permission to undertake a recalculation of the deduction applied pursuant to the transitional measure on technical provisions (TMTP) every 24 months or less (the PRA may require a firm to undertake the recalculation sooner than this if there has been a material change in the firm’s risk profile).
In line with expectations set out in Supervisory Statement (SS) 6/16 – Maintenance of the transitional measure on technical provisions under Solvency II (para 4.1), the PRA invites such firms to submit an application (submitted by an individual deemed as an appropriate individual by the firm, with the required authority to formally make such a submission to the PRA), requesting permission to undertake the above recalculation.
In order to streamline this process as far as possible, the PRA will not require that an application form be submitted. Instead, the application can submitted in the format of an email to the following email address: S2submissions@bankofengland.co.uk.
We would ask that the following wording is used in subject bar of the application email:
[Firm name and FRN] SOLVENCY II REGULATIONS 2015; REGULATION NO: 54(1)(b) – RECALCULATION OF THE TRANSITIONAL MEASURE ON TECHNICAL PROVISIONS (“TMTP”) – 31 DECEMBER 2023
And that the following wording is used as the content of the email:
Further to the PRA email communication [Name of firm] hereby applies to the PRA for permission to recalculate the transitional measure on technical provisions as at 31 December 2023.
Please note that you must apply for permission before carrying out the recalculation and should not submit details of the proposed recalculation as part of your application. While the PRA expects all firms to carry out the recalculation, as set out in SS6/16, the PRA recognises that it may be burdensome for firms that have recalculated their transitional measure, as a result of a material change in risk profile, shortly before the end of a 24-month period to then be expected to carry out another regular recalculation, if the resulting change would be minimal. Firms in this position should contact their usual supervisory contact in the first instance.
Firms will be aware of the PRA’s ongoing consultation on reforms to Solvency II, which include proposed changes to TMTP and the Financial Resource Requirement (FRR) test. Firms will also be aware of the Government’s risk margin reforms, where it is expected these will be in force through legislation by the end of the year. Firms should expect further communication on these matters in due course, but this does not affect the expectation that firms should apply for permission to carry out a TMTP recalculation as at YE2023.
Please submit your application by close of business on Friday 1 December 2023.
If you have any questions relating to the above, please contact your usual supervisory contact.