Updated on 8 December 2017 (originally published on 1 November 2017)
Authorisation and supervision of insurance special purpose vehicles – PS26/17
Overview
This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 42/16 ‘Authorisation and supervision of insurance special purpose vehicles’ and sets out the PRA’s final approach and expectations in relation to the authorisation and supervision of insurance special purpose vehicles (ISPVs), subject to the Risk Transformation Regulations 2017 (RTR) being passed through parliament.
This PS is relevant to all parties who wish to apply to the PRA for, or have obtained authorisation as, an ISPV. It is also relevant to insurers and reinsurers seeking to use UK ISPVs as risk mitigation in accordance with Solvency II.
This PS includes the following materials:
- Supervisory Statement (SS) 8/17 ‘Authorisation and supervision of insurance special purpose vehicles’ (Appendix 1);
- amendments to the Insurance Special Purpose Vehicles Part of the PRA Rulebook (Appendix 2);
- an application form in relation to the authorisation and supervision of ISPVs (Appendix 3);
- two sets of notification forms for MISPVs (Appendices 4 and 5); and
- updated amendments to the Insurance Special Purpose Vehicles Part of the PRA Rulebook following 8 December update (Appendix 6).
UPDATE: The Insurance Special Purpose Vehicle Part has been updated to insert the statutory reference to the Risk Transformation Regulations 2017, the commencement date, to consolidate the definition of ISPV, and to make minor administrative corrections. They are included as Appendix 6.
Firms may also find it useful to refer to the dedicated Insurance special purpose vehicles webpage.
Feedback on consultation responses
The PRA received sixteen responses to the CP. Chapter 2 summarise the responses, and provide the PRA’s feedback and proposed final approach in light of the version of the RTR as laid before Parliament.
Appendices
- Supervisory Statement 8/17
-
PRA RULEBOOK: SOLVENCY II FIRMS: NON SOLVENCY II FIRMS: TRANSFORMER VEHICLES INSTRUMENT 2017 - (updated version under Appendix 6) - Application form for insurance special purpose vehicles (ISPVs)
- MISPV New Risk Assumption Notification Form
- MISPV Group of Cells Notification Form
- PRA RULEBOOK: SOLVENCY II FIRMS: NON SOLVENCY II FIRMS: TRANSFORMER VEHICLES INSTRUMENT 2017
Published on 23 November 2016
Authorisation and supervision of insurance special purpose vehicles – CP42/16
Background
As part of the March 2015 Budget, HM Treasury signalled an intention to work with the London insurance market to design a new framework which would attract Insurance Linked Securities (ILS) business to the United Kingdom. The regulators also committed to work with HM Treasury to examine what steps might be taken, within the constraints of the Solvency II regime, to address any obstacles within the regulatory framework for ILS business.
Subsequently, in March 2016, HM Treasury released a consultation document in which it sought views on the regulatory, tax and corporate structure framework for ILS business in the United Kingdom. As part of that consultation, comment was also invited on the authorisation and supervision of ISPVs. HM Treasury released a second consultation document on Wednesday 23 November 2016 setting out further details of its proposed approach.
This joint CP sets out more detail on the regulators’ proposed authorisation and supervision regime for insurance special purpose vehicles (ISPVs) in the United Kingdom and should be read alongside HM Treasury’s consultation document.
Summary of proposals
This CP sets out the regulators’ approach and expectations in relation to the authorisation and supervision of ISPVs. It introduces a draft PRA supervisory statement (Appendix 1), a draft FCA statement (Appendix 2), proposed amendments to the PRA Rulebook (Appendix 3), a draft application form in relation to the authorisation and supervision of ISPVs (Appendix 4), and a draft notification form for firms to use when they propose to add new cells to a multi-arrangement ISPV (MISPV) (Appendix 5). The joint consultation reflects the views of each regulator insofar as is applicable to each regulator’s objectives.
It is relevant to all parties who wish to apply to the PRA for, or have obtained authorisation as, an ISPV. It is also relevant to parties who wish to apply to the FCA for registration of a Protected Cell Company (PCC), and to insurers seeking to use UK ISPVs as risk mitigation in accordance with Solvency II.
Responses and next steps
This consultation closed on Thursday 23 February 2017.