The Prudential Regulatory Authority (“PRA”) has published a new PRA Rulebook (PS5/14 – The PRA Rulebook). PS5/14 includes the PRA’s final Fundamental Rules (“FRs”). The FRs apply to all PRA firms (subject to legal restrictions) including insurers as is effective from 19 June 2014. (Principles for Business will continue to be imposed by the Financial Conduct Authority.)
The final FRs differ from the draft set consulted on in CP2/14 (see post onMarch 13th, 2014) and take into account points raised during the consultation.
The FRs will form the foundation of the PRA’s Rulebook. The FRs are as follows:
- FR1 – A firm must conduct its business with integrity.
- FR2 – A firm must conduct its business with due skill, care and diligence.
- FR3 – A firm must act in a prudent manner.
- FR4 – A firm must at all times maintain adequate financial resources.
- FR5 – A firm must have effective risk strategies and risk management systems.
- FR6 – A firm must organise and control its affairs responsibly and effectively.
- FR7 – A firm must deal with the PRA in an open and co-operative way and must disclose to the PRA appropriately anything relating to the firm of which the PRA would reasonably expect notice.
- FR8 – A firm must prepare for resolution so, if the need arises, it can be resolved in an orderly manner with a minimum disruption of critical services.
FR8 – Resolution
FR8 has particular significance for insurers as it introduces a requirement for resolution planning. Currently, the PRA has made no detailed rules concerning the provision of resolution information for insurers – unlike the rules for banks and investment firms. The PRA expects insurers to be responsive to discussions concerning the PRA’s resolution plans, but appreciates that compliance with FR8 will need to be judged in the context of an insurer’s own perception of its resolvability, absent any more detailed rules.