Published on 17 October 2018
Solvency II: Supervisory approval for the volatility adjustment - PS22/18
Overview
This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 22/17 ‘Solvency II: Supervisory approval for the volatility adjustment’. It also contains the PRA’s updated Supervisory Statement (SS) 23/15 ‘Solvency II: supervisory approval for the volatility adjustment’.
This PS is relevant to insurance and reinsurance companies using or intending to use the volatility adjustment.
In CP22/17 the PRA proposed to clarify its expectations in respect of insurance and reinsurance firms seeking approval to apply a volatility adjustment (VA).
The PRA received five responses to the CP. Respondents made a number of observations and requests for clarification which are set out in Chapter 2.
Implementation
The expectations set out in the attached SS will come into effect on the publication of the PS on Wednesday 17 October 2018.
Policy Statement 22/18Appendix
Published on 3 November 2017
Solvency II: Supervisory approval for the volatility adjustment - CP22/17
Background
This consultation paper (CP) sets out the Prudential Regulation Authority’s (PRA’s) proposals to clarify its expectations in respect of firms seeking approval to apply a volatility adjustment (VA) to insurance and reinsurance business.
This CP is relevant to insurance and reinsurance companies using or intending to use the VA.
Summary of proposals
The proposals clarify the risks that may arise from use of the VA and how firms are expected to consider those risks. The PRA proposes to update Supervisory Statement (SS) 23/15 ‘Solvency II: supervisory approval for the volatility adjustment’.
In the course of reviewing firms’ VA applications the PRA has identified particular areas of prudential risk that may arise from using the VA, and which have had to be addressed in the review process. This CP aims to alert all firms considering applications to use the VA to those risks, and to help them to produce high-quality applications that successfully address those risks.
Responses and next steps
This consultation closes on Friday 9 February 2018. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP22_17@bankofengland.co.uk.
Published on 20 March 2015
Solvency II: supervisory approval for the volatility adjustment - CP11/15
Update 1 June 2015: The PRA published Supervisory Statement 23/15 ‘Solvency II: Supervisory approval for the volatility adjustment’ following consideration of responses to CP11/15.
Background
This consultation paper seeks feedback on a draft supervisory statement that sets out the Prudential Regulation Authority’s (PRA) expectation of firms in relation to supervisory approval for the volatility adjustment (VA).
The statement is relevant to all UK Solvency II firms and to Lloyd’s.
Following public consultation, HM Treasury has decided to exercise supervisory approval for the volatility adjustment in the UK.
The PRA wishes to operate an effective and efficient process, and is therefore seeking views on its approach to supervisory approval. Firms may submit applications for approval to apply the VA from 1 April 2015. Firms may use the content of this draft supervisory statement to inform the preparation of their applications.
Further details on how to submit an application are on the webpage “Approvals and waivers under the Solvency II Directive ” on the Bank of England website.
Summary of proposals
The draft supervisory statement clarifies:
- the items that should be included in an application to use the VA;
- how the PRA will use the content of applications to assess whether the statutory conditions for approval to use the VA have been satisfied; and
- how the VA approval process will work, and its interaction with other Solvency II approval processes.
Responses
This consultation closed on 20 April 2015.