Prudential Regulation Authority Rulebook

3.1

The PRA expects firms to request its views at an early stage and ensure that any concerns it may have in relation to a proposed capital extraction are properly addressed before the proposal is implemented. Any request to the PRA should be made by the CEO or CFO of the firm and confirm that the board has approved the proposal having considered all the factors outlined in this statement.

3.2

Alongside its request, the firm should provide the PRA with a copy of the analysis submitted to its board showing the projected evolution of the financial resources and capital needs and requirements, and the downside risks to this position. Solvency II firms should also provide a copy of the firm’s most recent ORSA.

3.3

Where a firm has commissioned any independent actuarial review of its analysis, or other relevant factors such as an analysis of the adequacy of its policy records, it should make the PRA aware of this. The PRA may request copies of this analysis from the firm as part of its assessment of the capital extraction request. Where a firm has not already done so, the PRA may consider asking a firm to commission an independent review to provide assurance on the data underlying the request or the robustness of the analysis undertaken by the firm – for example, covering the actuarial assumptions used or the completeness and accuracy of the firm’s policy records. The PRA may be more likely to request such an opinion where, for example:

• a capital extraction request is significant in size;
• the proposed extraction results in the projected financial resources in a stressed scenario being less than either its overall solvency needs or SCR; and
• it has concerns about the accuracy of the firm’s data or analysis.

3.4

[Deleted]

3.4A

The PRA expects Solvency II firms to seek to hold capital to manage and mitigate the risks identified in the ORSA and capital extractions should be considered accordingly. The PRA will not expect Solvency II firms to seek capital extractions which would bring the level of capital below its overall solvency needs as set out in the firm’s ORSA, even if this figure is above the SCR.

3.5

In considering a proposed capital extraction, the PRA will take into account: the firm’s capital position immediately after the proposed extraction; the firm’s projections of its financial position including over a 3–5 year period; the appropriateness of the assumptions underlying these projections; the possible downside risks to these projections; and any other information that the PRA deems to be relevant.