Guidance

SS6/16 – Maintenance of the ‘transitional measure on technical provisions’ under Solvency II

Chapter

Introduction

Printed on: 06/11/2024

Rulebook at: 14/11/2019

1

Introduction

1.1

The Solvency II Directive allows for a recalculation of the transitional measure on technical provisions (TMTP)[1] every 24 months, or more frequently where the risk profile of the firm has materially changed. These Directive provisions have been transposed by HM Treasury’s Solvency 2 Regulations 2015 (2015/575) (see Regulation 54)[2]. The purpose of this supervisory statement is to provide clarity with respect to the PRA’s expectations as to how the TMTP should be maintained over the transitional period and the process for recalculations of the TMTP. It should be read alongside Regulation 54 of the Solvency 2 Regulations 2015, the Transitional Measures Part of the PRA Rulebook and the Supervisory Statement 17/15 ‘Solvency II: transitional measures on risk-free interest rates and technical provisions’[3].

  
  • 14/11/2019

1.2

This statement is of interest to all UK insurance firms within the scope of Solvency II and to the Society of Lloyd’s. It is particularly relevant to firms that have been granted approval to use the TMTP, or those that have been considering applying to use this transitional measure.

  • 14/11/2019

1.3

In particular, this statement sets out the PRA’s expectations and proposed process for:

  • how the calculation of the amount of the TMTP should be maintained over the transitional period;
  • requesting that a firm carry out a recalculation of the transitional measure; and
  • assessing a firm’s application for a recalculation on the basis of a material change in risk profile.
  • 14/11/2019

1.4

This statement expands on the PRA’s general approach as set out in its insurance approach document[4]. By clearly and consistently communicating its expectations of firms in relation to the particular areas addressed, the PRA seeks to advance its statutory objectives of ensuring the safety and soundness of the firms it regulates, and contributing to securing an appropriate degree of protection for policyholders. The PRA has considered matters to which it is required to have regard, and it considers that this statement is compatible with the regulatory principles and relevant provisions of the Legislative and Regulatory Reform Act 2006. This statement is not expected to have any direct or indirect discriminatory impact under existing UK law.

  • 14/11/2019

1.5

This statement has been subject to public consultation[5] and reflects the feedback that was received by the PRA.

  • 14/11/2019