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The consultation (CP3/15) also includes two draft supervisory statements: the first on the PRA’s expectations regarding these transitional measures; and the second on the internal model treatment of participations. It follows CP16/14 transposition of Solvency II - Part 3 where the intention to publish this CP was anticipated.
The CP is of interest to all UK insurance firms within the scope of Solvency II and to the Society of Lloyd’s. It should be read alongside the relevant European legislation, previous consultations on Solvency II, and relevant parts of the PRA Rulebook.
The proposed rules in this CP are designed to ensure a smooth transition towards the full requirements of the new regime. The Directive specifies a transitional on risk-free rates, which firms must apply to the PRA for approval to use, and which is designed to enable firms to transition from their current discount rate requirements to the corresponding Solvency II requirements. The Directive also specifies a transitional on technical provisions, which firms must apply to the PRA for approval to use, and which is applied as a deduction from a firm’s Solvency II technical provisions.
The draft supervisory statements in this consultation set out the PRA’s expectations regarding the calculation and application process to be used for these transitional measures. They also set out the PRA’s expectations of firms in relation to how participations in (re)insurance firms are reflected in the Solvency Capital Requirement at the solo level.
The PRA is required to transpose the Directive by Tuesday 31 March 2015 and the Solvency II regime will apply to all affected firms from 1 January 2016.
This consultation closes on Friday 20 February 2015.