Prudential Regulation Authority (PRA) chief executive Sam Woods has reportedly told parliament that insurance companies are overstating the issues regarding Solvency II.
Woods said on Wednesday before the parliament’s Treasury Select Committee that Solvency II is “basically a sensible regime,” Reuters reported.
However, he admitted that Solvency II, which sets out capital rules for EU insurers, needs some changes.
Continue Reading “PRA says insurers exaggerating Solvency II problems – report” at Insurance Business News
As the UK government continues to develop and advance its ambition of turning London into a global hub for insurance-linked securities (ILS) business, international law firms have highlighted some uncertainties and potential shortcomings of the new guidelines.
The establishment of an ILS hub in the United Kingdom has the potential to expand the reach and influence of the ILS marketplace, while increasing the relevance and position of London as a global hub for insurance and reinsurance business.
Fist discussed in March 2015, the UK Treasury has now published its draft proposals for the framework, with the UK’s financial regulators, the Prudential Regulation Authority (PRA) and the…
Continue Reading “Law firms highlight potential issues with UK’s draft ILS regulations” at Artemis
Is it possible for regulators to become too heavily involved in the insurance business? One giant of the UK insurance sector seems to think so. Legal & General has accused a regulator of becoming increasingly interventionist in their control of the industry believing that their role should be cut back.
Specifically, it highlighted the position of the Prudential Regulation Authority (PRA) in relation to Solvency II rules stating that it is “effectively overruling the judgment of the board” in relation to setting capital requirements; and that it has started to take an increasingly “directive” approach in regards to transaction approval.
“Boards do not feel empowered to make commercial decisions without reference to the regulator,” it said in a submission to the Treasury Select Committee.
Continue Reading “Time to scale back the role of insurance regulators?” at Insurance Business
In an update of its supervisory statement, the regulator says such firms occasionally approach them with requests to withdraw capital.
The PRA recognises that these requests may be legitimate in certain circumstances, but points out that the move “inevitably” weakens the level of protection available for remaining policyholders.
“This is of particular concern for the PRA in respect of firms in run-off, since these firms, compared to other insurers, may have more limited access to further capital, and often have fewer management actions available to them to restore capital levels if the need subsequently arises,” said the PRA in the statement.
“For example, the financial position of such firms can be adversely affected by unexpected reserve deterioration as new risks emerge or through changes in the expected frequency or severity of known risks.”
Continue Reading “General insurers need thorough review on capital extraction when firms run-off, says PRA ” at The Actuary News
When Chris Moulder, the PRA’s Director of General Insurance
spoke at the Worshipful Company of Insurers’ iNED Forum in April, he repeated a common PRA refrain:
the PRA is worried about internal model drift; and the risk that some firms will focus “on areas where the model is … ‘conservative’ (rather than on areas where capital might be … less adequate), [and] capital requirements [will] trend inappropriately downwards…”
He went on to stress that the PRA would be monitoring that risk, and urged Boards to do the same. What he didn’t say was that the PRA was working on a new solution to this problem (if a problem’s what it is).
Continue Reading “Blog: Solvency II: UK PRA (Still) Worried About Internal Model Drift, But A Solution Is At Hand” at JD Supra Business Advisor
All senior staff with “significant levels of responsibility” within large UK-regulated insurers should be subject to the same remuneration requirements, the Prudential Regulation Authority (PRA) has confirmed.
The regulator has issued a draft supervisory statement setting out its expectations of firms subject to the EU-wide Solvency II regulatory regime (22-page / 869KB PDF), after its own review of industry remuneration practices found that firms were confused about which staff were subject to the new rules and “significant discrepancies” in the ways in which they dealt with deferral of a certain proportion of variable pay.
In its statement, the PRA said that it was important that all firms applied the rules the same way in order to prevent a “race to the bottom”, in which firms were “able to compete for staff resources by adopting lower than the industry standard”.
Continue Reading “All Solvency II firms should apply remuneration requirements in the same way, says UK regulator” at Out-Law News
UK non-life insurer Direct Line has submitted its application to use a partial internal model to calculate its capital requirements under Solvency II.
The application was sent to the UK’s Prudential Regulation Authority in December and the authority has six months to respond.
The insurer began 2016 using the standard formula and reported a solvency ratio of 147% as of 31 December 2015, post the dividend payment and assuming that expected changes to hedging arrangements were in place by that date.
The group internal model is expected to reduce the £1.68bn ($2.35bn) capital requirement and more accurately assess the company’s risk, but there will be no “step change” in capital requirement, said group chief financial officer John Reizenstein in the firm’s annual results call.
Continue Reading “Direct Line anticipates internal model approval by June” at Insurance ERM News
The chief executive of the Prudential Regulation Authority has been asked to find out what the cost of implementing Solvency II was to the industry.
Andrew Bailey, who will take over as chief executive of the FCA once a replacement can be found for him at the PRA, was asked to look into the cost of Solvency II by the chairman of the Treasury select committee Andrew Tyrie.
The request came during a hearing on the costs and benefits of Britain’s membership of the European Union.
Solvency II is a European-wide regulation that specifies the levels of capital that insurance companies must hold and was more than 10 years in the making.
Continue Reading “PRA chief must calculate cost of Solvency II” at FT Advisor
The heads of Britain’s twin financial regulators said more detail is needed on David Cameron’s deal to allow the City to object to Eurozone financial regulations.
Andrew Bailey, the head of the Bank of England’s Prudential Regulation Authority, told the Treasury select committee that more is needed to understand what the deal will mean in practice.
The bit about ‘respecting the rights and competences of the non-participating member states’: taken as a piece of legislation, that’s a good piece of language, but […] where’s the substance? That’s what is still being negotiated,” Mr Bailey said.
He was referring to a part in the draft settlement that refers to economic governance, where it pledges to prohibit “discrimination” of a particular currency, and adds that while eurozone members move towards an ever-closer union, different rules may be needed to be applied across the EU when it comes to financial regulation.
Continue Reading “Financial regulators call for more detail on EU referendum deal” at FT Advisor
PRA is consulting on a policy requiring external audit of elements of Pillar 3 disclosure under Solvency 2.
Under Pillar 3, Solvency 2 firms must disclose publicly a Solvency and Financial
Condition Report (SFCR). The proposed policy would require external audit of quantitative and qualitative information included in the “Valuation for solvency purposes” and “Capital management” sections of the SFCR of insurers prepared at the solo, group and sub-group level.
Where production of an SFCR is required, PRA proposes to require these elements to be externally audited, subject to two exemptions.
Continue Reading “PRA consults on Solvency 2 auditing” at Lexology