Published on 17 October 2018
Solvency II: External audit of the public disclosure requirement – PS25/18
Overview
This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 8/18 ‘Solvency II: external audit of the public disclosure requirement’. It also contains the PRA’s final policy, as follows:
- amendments to the External Audit Part of the PRA Rulebook (Appendix 1) and
- updated Supervisory Statement (SS) 11/16 ‘Solvency II: External Audit’ (Appendix 2).
This PS is relevant to all UK Solvency II firms (including mutuals), auditors and users of Solvency and Financial Condition Reports (SFCRs).
In CP8/18 the PRA proposed to remove the external audit requirement for the SFCRs of certain small Solvency II firms, and certain small Solvency II groups (collectively ‘small insurers’). The SFCR is the key public disclosure under Solvency II.
The PRA received 22 responses to the CP. Respondents generally welcomed the PRA’s proposals to remove the audit requirement for small insurers. However, a number of observations and requests for clarification were made. Responses to comments are set out in Chapter 2 of the CP.
Implementation
The changes to the External Audit Part of the PRA Rulebook and the amendments to SS11/16 will be effective from Thursday 15 November 2018.
Policy Statement 25/18Appendix 1: PRA RULEBOOK: SOLVENCY II FIRMS AND NON-AUTHORISED PERSONS: EXTERNAL AUDIT AMENDMENTS INSTRUMENT
Published on 11 April 2018
Solvency II: external audit of the public disclosure requirement - CP8/18
Background
In this consultation paper (CP), the Prudential Regulation Authority (PRA) sets out its proposal to amend the rule that requires the external audit of parts of the Solvency and Financial Condition Report (SFCR), under Rule 2 of the External Audit part of the PRA Rulebook. The SFCR is the key public disclosure under Solvency II.
This CP is relevant to all UK Solvency II firms (including mutuals), auditors and users of SFCRs.
Summary of proposals
The PRA sets out its proposal to amend the rule that requires the external audit of parts of the Solvency and Financial Condition Report (SFCR), under Rule 2 of the External Audit part of the PRA Rulebook. The PRA estimates that the proposed amendments would remove the SFCR external audit requirement from the end of 2018 for more than 150 smaller UK Solvency II firms (including mutuals) and groups. The PRA considers that this change would improve the proportionality of the requirement.
The proposals in this CP have been developed by the PRA as part of its work on reviewing aspects of the insurance prudential framework in light of experience following the United Kingdom’s implementation of Solvency II, see ‘PRA launches series of improvements to the implementation of Solvency II’, 25 October 2017.
Responses and next steps
This consultation closed on Wednesday 11 July 2018. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP8_18@bankofengland.co.uk. The PRA proposes that any amendments would be effective for financial years ending on or after Thursday 15 November 2018.