On 17 September 2018, the PRA published the text of a letter sent by its Chief Actuary for General Insurance, James Orr, to chief actuaries.
The letter gives details of the focus of the PRA's ongoing supervisory approach:
- the PRA's discussions with firms and reviews of actuarial function reports have in some cases identified insufficient challenge, or a lack of appropriate independence and objectivity in the views being expressed. The PRA reminds firms of the weaknesses mentioned in its 31 May 2018 Dear CEO letter on market conditions facing specialist general insurers. It says that these weaknesses are relevant to the actuarial function’s specific responsibilities and the PRA's ongoing supervisory work will consider the adequacy of firms’ responses to them;
- as mentioned in the above Dear CEO letter, the PRA continues to observe a disconnect between some firms' perceptions of current price adequacy and their views on recent risk adjusted rate changes. Related to this, the PRA's review of actuarial function reports pointed to insufficient consideration of premium adequacy. The PRA will be undertaking further work on business planning, underwriting policies and capital, and will share its findings in due course;
- the letter gives a detailed summary of the PRA's targeted reviews of firms' reserving. The PRA says that it believes all insurers could benefit from assessing the areas where their operations might require further development, and considering the actions they might take if so.
If firms wish discuss the content of the letter the PRA says they should contact their usual supervisory contact in the first instance.