Julian Adams has spoken on how the new regulatory structure will deal with insurers and Solvency II. He discussed the role of the Prudential Regulation Authority (PRA) and its statutory objectives. He explained that supervisors will need to be able to answer 30 questions about the firms they supervise, so they can be confident they understand the firm’s business, financial viability and vulnerabilities and know what might cause the firm to fail and what harm might stem from the failure. He said PRA does not envisage a zero failure regime, but seeks to minimise the probability of firm failure and the effects of any failure. He explained the new supervisory framework that would assess the business model and whether any reasonable resolution approach could apply if it failed. PRA will then look at firms’ financial strength and risk management and governance arrangements. He then explained how FSA’s plans for Solvency II implementation will fit into the new regulatory philosophy. He focused on how FSA intends to address internal model approval and the judgements supervisors have to make. (Source: The New approach to Insurance Regulation and the Implementation of Solvency II)