In its latest Insurance Directors’ Update Letter for all firms affected by Solvency II, the PRA has confirmed that its priority prior to implementation of Solvency II on 1 January 2016 remains the approval of Solvency II applications. The PRA’s approach to approvals is set out in a letter from the Director of Insurance Supervision on 24 September 2015.

In the Update, the PRA sets out its position in relation to a number of areas within the Solvency II regime. It covers valuation difficulties with equity release mortgages, dealing with reinsurance counterparty risk credit, the calculation of the transitional deduction for technical provisions, applying for Solvency II waivers and modifications as well as national specific templates.

In October 2014, the PRA recommended that firms commission a ‘balance sheet review’ (“BSR”) in order to demonstrate certain calculations have been carried out in accordance with Solvency II requirements. The Update sets out details of the PRA’s findings on the appropriateness of firms’ risk margin methodologies, examined during step 1 of the BSR.

A useful timetable of the PRA’s activity during November / December 2015, together with a summary of all Solvency II web updates since the previous Directors’ Update was published in September 2015, is also provided.

A link to the Insurance Directors’ letter is here.