4
Ongoing supervision of the TMTP
Limiting the amount of the transitional measure in future years
This section has been deleted.
4.1
Deleted.
- 31/12/2024
Recalculations of the transitional deduction
4.2
Deleted.
- 25/11/2016
Amount of TMTP applied and disclosed by a firm
4.2A
For all firms with a TMTP permission there is a requirement that the amount of the transitional deduction to be applied by a firm is to be between zero and a maximum amount.[6] If a decision is taken by such a firm to apply less than the maximum amount, the PRA expects the firm to include both the maximum amount and actual TMTP amount in the notes to market disclosures, and to share this information with its supervision team. The firm should maintain a transparent approach to determining the amount of TMTP benefit it is applying. The PRA expects this approach to be followed consistently by firms within all Solvency II reporting including for Quarterly Reporting Templates (QRTs). This approach should also be reflected within a firm’s ORSA and risk management framework.
Footnotes
- 6. The amount is the maximum number derived from the TMTP method in Transitional Measures on Technical Provisions 5 or the legacy approach outlined in the relevant firm’s permission.
- 31/12/2024
4.2B
The PRA expects that a firm’s disclosure of its solvency ratio will include an allowance for TMTP no greater than the maximum amount at the relevant reporting date.
- 31/12/2024
Criteria for legacy approach firms
4.2C
As set out in paragraph 5.3 of SoP ‘Permissions for transitional measures on technical provisions and risk-free interest rates’, legacy approach firms were required to meet certain criteria prior to the PRA varying their permission to apply the approach. The PRA expects that legacy approach firms provide evidence that they continue to meet the criteria set out in paragraph 5.3 of SoP ‘Permissions for transitional measures on technical provisions and risk-free interest rates’ on an annual basis as part of the ORSA.
- 31/12/2024
Consistency of Solvency I and Solvency II bases for legacy approach firms
4.2D
The underlying assumptions of both Solvency I Pillar 2 and Solvency II technical provisions are on a best estimate basis. Both Solvency II and INSPRU 7[7] include provision for the best estimate basis to be based on up-to-date and credible information, and to reflect market conditions. Legacy approach firms are expected to review the best estimate assumptions at regular intervals, and must make updates that reflect changes in market conditions and/or demographic assumptions.
Footnotes
- 7. As defined in Transitional Measures on Technical Provisions 1.2
- 31/12/2024
4.2E
Where changes are made to best estimate assumptions which are inputs to both the Solvency I and Solvency II bases, and these changes have a material impact on the level of technical provisions, the PRA expects that the assumption changes should be made consistently within the Solvency I Pillar 2 and Solvency II best estimate bases. The PRA’s view is that the impact of such an assumption change should not be included within the TMTP benefit as the change reflects market conditions and/or demographic assumptions, rather than being introduced by Solvency II requirements themselves. The need to maintain consistency is an ongoing expectation, and applies whenever TMTP is calculated.
- 31/12/2024