On Apr. 22, UK PRA consulted on restatement of assimilated law.
PRA issued proposals which will finalize rules and other policy materials that will replace Solvency II assimilated law being revoked under Smart Regulatory Framework.
This is final PRA consultation needed to implement conclusions of Solvency II Review.
Represents important step in completing adaptation of UK's prudential framework for insurers inherited from EU into framework consistent with UK approach to regulation.
Also follows UK PRA Feb. 2024 near-final rules SLV2 reporting phase 2, see #203017.
Consultation
Proposes restatement into PRA policy material of those parts of Solvency II regime which have not already been subject to consultation as part of Solvency II Review.
Sets out how PRA proposes to restate requirements from assimilated law into PRA rulebook, other policy materials e.g. supervisory statements, statements of policy.
Some instances where PRA proposes to reform certain areas as part of restatement.
Has already consulted on restatements of parts of assimilated law in other papers, so this consultation should be read in conjunction with CP19/23, PS2/24, and PS3/24.
Proposals
Appendix 2 to consultation summarizes the assimilated law covered by proposals.
PRA proposes to restate this into PRA policy material without material changes to policy substance, to maintain requirements on firms and PRA's current approach.
However, the regulator proposes changes to requirements on firms in two areas.
New time-limited transitional rule in Own Funds Part of PRA RB allowing firms to continue to treat legacy paid-in preference shares issued before Jan. 18, 2015 as not relevant when assessing compliance of their ordinary shares with certain unrestricted T1 own fund requirements for a period of 25 years, chapter 7 deals with this proposal.
And proposes, when restating amounts denominated in EUR into UK framework, those amounts will be restated into GBP using same conversion rate confirmed in PS2/24.
PRA has identified areas of inconsistency in assimilated law (e.g. inconsistent/incorrect cross-references, missing definitions) proposes to correct these under the consultation.
Also proposes to update references to any EU directives with references to the relevant parts of UK regulatory framework in accordance with Smart Regulatory Framework.
EIOPA guidelines generally not restated as do not constitute requirements on firms.
However, PRA proposes to incorporate some EIOPA guidelines into its policy material where it considers this will help ensure that the restated requirements are clear.
Proposes to move EIOPA guidelines on considerations for supervisory authorities into relevant statements of policy, will review status of remaining EIOPA guidelines later.
Also notes consequential changes needed re earlier Solvency II policy statements.
Effectiveness
The closing date for the submission of responses to the consultation is Jul. 22, 2024.
PRA proposes implementation date for resulting changes would be Dec. 31, 2024.
Regulators
UK PRA
Entity Types
Ins
Reference
CP5/24, 4/22/2024; SLV2 Reg 2015/35, Dir 2009/138; Brexit; Citation: PRA RB; Own Funds;
