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In a consultation paper, the PRA suggested it plans to adopt all the interim guidelines issued by the European Insurance and Occupational Pensions Authority (EIOPA). But experts say the paper indicated that the regulator had taken a U-turn in its attitude to some of the guidelines. "It does now appear that the PRA is likely to adopt all of the guidelines, including the narrative reporting that it had previously indicated it was minded not to adopt", says Janine Hawes, insurance director at KPMG in London.
This change is not unexpected given the requirement for all European supervisors to make every effort to comply with the guidelines, Hawes adds. National regulators are required to implement Eiopa's guidelines in 2014.
The guidelines, which cover reporting, risk assessment and governance, are aimed at helping firms and national supervisors prepare for Solvency II. The reporting requirements have been a matter of particular concern for the UK insurance industry, as more than other guidelines they represent a step change from existing rules in the UK. Some insurers have deferred significant elements of Pillar III as they waited for certainty on the final version of the rules.
In the consultation paper, the PRA said it expects insurers to make progress towards establishing systems and structures to deliver high quality information and to submit information to allow it to review and evaluate the quality of the information and the progress made. Firms will be required to conduct data validation checks and submit quantitative information using Extensible Business Reporting Language (XBRL) as well as narrative reports, it said.
Under existing legislation, the supervisor has the power to request additional information. But there was no indication that the PRA is considering changes to the rulebook or an application of additional requirements that goes beyond Eiopa's proposed guidelines.
Outlining its approach to the implementation of the guidelines on the forward-looking assessment of a firm's own risks, the PRA said it was not setting deadlines for submission of an Own Risk and Solvency Assessment (ORSA). But it will require insurers to demonstrate that progress has been made in their 2015 ORSA compared to the previous year.
The PRA said it will consider ways to enable firms to use their preparatory Solvency II work to meet existing regulatory individual capital assessment requirements. It also emphasised the application of the interim guidelines will be proportional and incremental.
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