Prudential Regulation Authority Rulebook

4.1

General insurance firms should consider variability in premium provisions on their year-end Solvency II balance sheet. In the same way that events can occur that cause claims provisions to vary, some of those same events will also cause the premium provision to vary. Examples include changes in court awards for liability claims or an unforeseen major natural catastrophe event, like the Tohoku earthquake.

4.2

Firms that do not consider this risk may fall short of the internal model T&S. The PRA considers this risk exists for all actively underwriting internal model firms who model on a one-year earned basis, although it may be that for some firms this risk will be small in the context of their total SCR.