Insurers have come out in support of the Prudential Regulation Authority’s (PRA) proposal to make improvements to the Solvency II regime, almost two years after its implementation.
The regulator has published the first in a series of consultation papers on reforming Solvency II. According to Sam Woods, deputy governor for Prudential Regulation, the PRA has identified a number of areas in which it can improve on implementation
Authorities are initially consulting on Matching Adjustment (MA). The PRA said this cushions certain life insurers’ capital resources, subject to conditions and prior approval, when they can demonstrate that the cash flow of a designated portfolio of assets is matched to life insurance liabilities.
“The industry has consistently and unanimously highlighted concerns about the rigid nature of the matching adjustment, the burden firms face when trying to keep their internal model up-to-date and the excessive cost of regulatory reporting,” said Steven Findlay, head of prudential regulation of the Association of British Insurers.
The PRA said it has worked closely with firms and the ABI in developing reform measures. By December this year, the regulator is to release a consultation paper on the minor model change process with the aim of reducing the burden on firms and making better use of supervisory resources.
Additionally, by January next year, the PRA said it will publish a consultation paper on proposals to reduce the reporting burden on firms.
“This will include reducing the content required in the PRA’s National Specific Templates, and a revised approach to how the PRA grants quarterly reporting waivers,” said the regulator.
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