Commenting on the PRA’s publication of CP12/23 ‘Review of Solvency II; Adapting to the UK Insurance Market’, Huw Evans, KPMG UK Insurance Partner, said:
“The PRA’s proposals appear to be sensible and welcome changes to the UK Solvency II regime, taking forward proportionate reforms while still maintaining a robust risk-based capital framework consistent with our European neighbours and international best practice.
“The PRA’s clarity on implementation timelines is also welcome and would see the UK introducing its Solvency II reforms ahead of the parallel process in the EU. For firms using internal model calculations, there will be a significant amount of implementation work ahead which should not be under-estimated by firms or regulators.
“While there is some reduction in overall requirements, the PRA’s own cost-benefit analysis makes clear the reforms will be of most benefit to foreign insurers operating in the UK via branches, rather than established UK firms using internal models.”
Commenting further on the TMTP and Internal Model proposals, James Isden, KPMG UK Insurance Director, said:
“The changes to the transitionals (TMTP) regime look helpful; they will make disclosures more consistent and provide more calculation options to insurance firms. However, before making their choices, insurers will need to work carefully through the implications of moving to a new default methodology as this would be a decision that cannot be reversed at a later date.
“The proposed streamlining of requirements for Internal Models and the additional flexibilities will all be welcome. It also makes sense to allow firms that have substantially completed their Internal Model to be able to proceed subject to additional PRA requirements compared to the inflexibility of the current regime. The new annual ‘Analysis of Change (AOC)’ requirement will be an additional challenge for firms and they will need to prepare accordingly.”
Commenting on the proposals relating to Third Country branches and Mobilisation, Matthew Francis, KPMG UK Insurance Director, said:
“The changes to requirements for Third Country branches will be particularly welcome for commercial lines (re)insurers operating in the UK via a branch. This should help the UK’s attractiveness to these firms. The removal of the RSR reporting requirement and other templates is positive.
“The increased flexibility to the Mobilisation regime is welcome, as are the increased thresholds for firms to be required to comply with Solvency II rules. These will help the UK’s attractiveness as an insurance center.”
