On Nov. 15, UK PRA added, updated insurer modifications by consent.
PRA issued new modifications by consent to PRA rules applying to insurers, following the finalization of updates to rules and policy concerning Solvency II requirements.
And amended existing modifications by consent in light of update to rules and policy.
Solvency II Reporting 3rd Country Insurance Branches
PRA issues modification by consent (MbC) for Category 3 and 4 3rd country insurance branches for relief from some quarterly and annual templates following PRA PS15/24.
New MbC is based on new statement of policy (SoP) Solvency II regulatory reporting waivers, effective from Dec. 31, 2024, combines quarterly relief currently set out in Solvency II Reporting 2.2(1) MbC (category 3 and 4 branches) as well as the annual relief described in the current version of supervisory statement (SS) SS44/15.
This version of SS44/15 will lapse end Dec. 30, 2024, new version will come in force.
Concurrently, quarterly/annual relief set out in new MbC will come in force Dec. 31.
As above, for quarterly reporting relief, Category 3 and 4 branches have been able to consent to a rule modification re Solvency II Reporting 2.2(1), these existing directions will be revoked on Dec. 30, 2024, branches holding it will be contacted by the PRA.
Direction for the MbC lists the relevant rules, MbC will come in force Dec. 31, 2024.
LACDT Solvency Capital Requirement
PRA is offering an MbC to modify rule 6.4(3) in Solvency Capital Requirement - Standard Formula (SCR-SF) part of Rulebook, offer consequential rule modifications.
Being offered as permission under s138BA of FSMA, allows firm to recognize limited increase in deferred tax assets (DTA) within calculation of Loss Absorbing Capacity of Deferred Taxes (LACDT), specifically up to 5% of Gross SCR Scenario as defined in chapter 4 of SoP Solvency II: The PRA's approach to Standard Formula adaptations.
This is permissible when it is probable that future taxable profits will be available to utilize against an increase in DTA following instantaneous loss referred to in the rules.
MbC is available to firms that calculate LACDT using the Solvency II Standard Formula rules and have a reported ratio of eligible own funds to SCR not less than 175%.
Firms wishing to apply should complete s138BA permission application form and complete relevant sections on MbC permission in supplementary information form.
Solvency II Reporting Solo Insurance Firms
PRA has amended MbC of Solvency II Reporting 2.2(1) for solo insurance firms, which exempts Category 3 and 4 insurance firms (solo or part of a group) from reporting to PRA solo templates in Reporting Part with frequency of less than one year (quarterly).
MbC updated as part of UK Solvency II package, does not apply to firms seeking modification at Group level, who should apply with standard waiver/modification form.
Firms currently holding one of the exiting MbCs, of Jul. 6, 2018, Dec. 17, 2021, or Mar. 16, 2024, will be contacted by PRA to consent to replacement of current MbC.
Existing directions will lapse at 11:59pm on Dec. 30, 2024, modification for solo insurance firms will come into force on Dec. 31, 2024, direction gives details.
Pure Reinsurance Branches
PRA has updated MbC for all pure reinsurance 3rd country branches to waive the PRA rules on 3rd country branch investments, has been extended to Jul. 31, 2029.
And updated following PS15/24, whereby most of the previous MbC content will be absorbed into the PRA Rulebook, effective from Dec. 31, 2024.
Direction for updated MbC is issued, firms already using MbC will be contacted by PRA.
Updated modification will come into force at the beginning of Dec. 31, 2024.
Third-Country Insurers, Risks Not in UK
PRA has updated MbC for all 3rd country insurance branches to exclude risks that are not located in the UK from certain rules and regulatory reporting requirements.
MbC has been extended to Jun. 30, 2029 and updated following issue of PS15/24.
Category 3 and 4 branches that consent to both MbC on Solvency II Reporting 2.2(1) for 3rd country insurance branches and this MbC, need to report IR.05.02.01 (in relation to non-UK risks) as stated in this MbC, despite the waiver in the former MbC.
This will allow PRA to have sight of size of non-Uk risks, direction notes rules impacted.
Modification will come into force at the beginning of Dec. 31, 2024.
Insolvent Insurers
PRA has amended MbC available to regulated insurers which are either insolvent or in insolvency proceeding, including those which were previously in insolvency proceeding but which are currently operating a Court sanctioned Scheme of Arrangement.
MbC facilitates proportionate approach to their supervision, while ensuring these firms meet their regulatory requirements, MbC is updated following publication of PS15/24.
Firms currently holding existing MbC of Mar. 19, 2021 will be contacted by PRA to consent to its replacement, a direction for the amended MbC is available.
Existing direction will lapse at 11:59pm on Dec. 30, 2024, new MbC effective Dec. 31.
Nov. 20, 2024 Addition of Documents
On Nov. 20, 2024, UK PRA added written notice for the modification by consent of loss absorbing capacity of deferred taxes to its webpage on rule waivers and modifications.
If the regulator grants a request for this modification, it will publish the approved modification written notice in respect of each firm on the Financial Services Register.
Nov. 29, 2024 Solvency II US-Parented Undertakings
On Nov. 29, 2024, UK PRA issued a modification by consent of the Solvency II Group Supervision rules 20.1 and 20.2 with reference to US-parented undertakings.
This is available to insurance and reinsurance undertakings authorized by the PRA, the parent undertaking of which is an insurance holding company or mixed financial holding company which has its head office in the United States.
Group supervision provisions of Covered Agreement signed by UK and US in 2018 came into effect Dec. 2020, so provisions for UK-parented groups are fully applicable.
PRA invites firms with US-parented groups to apply a rule modification to reflect the Covered Agreement, should help these groups in meeting UK regulatory requirements.
Firms wishing to take advantage of the modification should read the direction and contact PRA with a suitable request, regulator will confirm if request is granted.
This modification will be effective from the beginning of Dec. 31, 2024.
