Prudential Regulation Authority Rulebook

2.1

Firms can formally submit applications to the PRA for Solvency II approvals from 1 April 2015. Prior to submitting an application the PRA encourages firms to discuss the approvals they intend to apply for with their usual supervisory contact.

2.2

For all Solvency II approvals, the PRA will consider applications against the criteria set out in the Solvency II Directive and Solvency II Regulations and inform the firm of its decision. As the PRA can reject an application for a Solvency II approval, firms should have a contingency plan in place in case the application is rejected. This should include any wider impact on other aspects of Solvency II implementation, for example, the internal model.

2.3

Where the PRA is the group supervisor, the PRA will consult the relevant members of the college of supervisors and take into account their views as part of reviewing group applications. The PRA also expects to have input into the group application processes where the PRA is part of a college of supervisors led by a group supervisor from another Member State.

2.4

Once the PRA has received applications for approvals, further information regarding good practice may be considered useful or necessary for firms and the PRA will communicate accordingly.

2.5

Firms submitting applications for multiple Solvency II approvals, including for the internal model, are expected to understand any dependencies between the applications and how these may affect the order in which they submit their applications. In addition, as a result of the relationship which exists between certain approvals, firms are also expected to have a contingency plan in case they do not receive approval for applications where dependencies exist, for example:

• firms applying to use the MA may consider another measure as an alternative;
• where firms apply for any of the transitional measures at the same time as applying for the MA and/or volatility adjustment (VA), the PRA expects firms to provide sensitivity tests showing the impact on the transitional measure(s) if their applications for the other adjustments are approved or rejected; and
• where a group submitting an internal model application is intending to use the deduction and aggregation method (method 2) for the group solvency calculation, or intending to apply to exclude an entity from the scope of group supervision, consideration should be given to the impact on the group internal model application if these applications are rejected.

2.6

Some firms applying for internal model approval may have a dependency on the approval to use the MA. Firms should consider the impact on the internal model if the MA application is rejected. This includes but not limited to, modelling of individual risk factors, proxy modelling techniques (including loss functions and identification of the biting scenario), and the solvency capital requirement.

2.7

Where approvals are related to an equivalence decision, if firms wish to submit an application before the equivalence decision is finalised, they may submit an application, stating the assumptions made with regard to equivalence. Where appropriate, the PRA may refrain from making a decision until the equivalence decision has been finalised.