The PRA has just published Consultation Paper | CP38/16 Solvency II: group supervision“. The consultation proposals are intended to clarify which parts of the PRA’s “Solvency II: An update on implementationletter of 25 July 2014 are still current, by drawing them into a more widely updated version of its existing Supervisory Statement on group supervision (SS9/15).

The PRA’s proposed amendments:

  1. Make it clearer that, if the PRA supervises a group, and:
    • the group wants to exclude a particular entity from the scope of group supervision, it must apply for a waiver or rule modification under section 138A of the Financial Services and Markets Act 2000 (a Waiver), and the application must reflect the criteria in article 214(2) of the Solvency II Directive;
    • the group wants to carry out its group solvency calculation using the deduction and aggregation method, or a combination of the deduction and aggregation method and the accounting consolidation method, it must apply for a Waiver, and the application must articulate the way in which the firm believes the elements in article 328(1) of the Commission Delegated Regulation should be considered in the context of the firm’s application;
    • the group wants the PRA to specify “other methods” when the group includes a 3rd-country parent undertaking in a jurisdiction that’s not Solvency II equivalent, it must apply for a Waiver, and the application should propose “other methods” for the PRA to consider;
  2. inserts a new section 5A (Availability of group own funds) into the Supervisory Statement. In particular, the PRA expects firms to provide evidence of the absence of legal and regulatory restrictions on the transferability of own funds, and demonstrate that group own funds can be made available to the group within 9 months (if required). This evidence is therefore likely to include a legal analysis that takes into account, for example, articles 330 to 334 of the Commission’s Solvency II Delegated Regulation, any relevant solo undertaking 3rd-country rules, and the PRA’s Solvency II group rules.

The consultation period closes on 7 February 2017.