The United Kingdom’s Prudential Regulation Authority (PRA) has announced plans to release its final rules following its review of Solvency II, by mid-November 2024.
These updated regulations for insurance firms and groups will take effect on December 31, 2024, according to a statement from the regulator.
As per AM Best, the primary focus of the PRA’s 2024 proposals will be to restate existing laws assimilated from the European Union’s Solvency II framework into the UK’s own policy structure. The PRA noted that there will be minimal material changes as the transition from Solvency II to Solvency UK progresses.
The PRA explained that it made few policy proposals for 2024, as much of its reform agenda was addressed in prior consultation papers. Adding further substantive changes now, the PRA stated, would delay the implementation of previously outlined reforms.
Notable changes proposed in 2023 included adjustments to matching adjustment regulations, enhancements in risk management, and increased responsibilities for senior managers.
A potential area for reform involves transitional rules related to the “own funds” section of the PRA’s rulebook. The regulator is considering allowing firms to continue treating legacy paid-in preference shares issued before January 18, 2015, as exempt from compliance with certain Tier 1 Own fund requirements for a 25-year period.
Additionally, the PRA’s proposals will include updates to the conversion rates for accounts dealing primarily with euros. These adjustments are part of ongoing efforts to ensure that regulations remain aligned with the financial realities faced by UK-based insurance companies.
The finalised rules and the transition from Solvency II to Solvency UK are part of the broader shift in regulatory frameworks as the UK continues to move away from EU regulations.
Back in July, the regulator also outlined its plans for next year’s life insurance stress test (LIST). According to the PRA, the life insurance stress test will not be used to inform the setting of capital requirements or buffers, unlike the annual cyclical scenario bank stress test. Meanwhile the plan is to run life insurance stress tests every two years.
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