The PRA has issued consultation paper CP43/15 in relation to its proposals to require Solvency II firms to obtain an external audit of certain aspects of the publicly disclosed Solvency & Financial Condition Report (SFCR). The focus of such external audit would be those sections of the SFCR dealing with ‘valuation for solvency purposes’ and ‘capital management’. The paper sets out details of the background to as well as the rationale for the PRA’s proposals. It identifies two possible exemptions from the requirements, one of which is an exemption from an external audit of the Solvency Capital Requirement for firms using an approved internal model.

The paper also includes information on the PRA’s cost / benefit assessment of the proposals, offering insight into the PRA’s position on the benefits of an external audit of the SFCR. Its view is that the cost of the proposed audit would be proportionate and increasing confidence in insurers’ publicly available information would have a positive impact on the market more generally.

The consultation period will close on 19 February 2016 and the PRA has indicated it will consider feedback from stakeholders before producing a policy statement containing its final rules and a supervisory statement. Its intention is to implement the requirements with effect from 30 June 2016.

A link to the consultation paper is here.