Prudential Regulation Authority Rulebook

1.1

Unless otherwise stated, this Part applies:

1. (1) to a UK Solvency II firm that is not a small firm for external audit purposes;
2. (2) to the Society in accordance with General Application 3; and
3. (3) at the level of a group, that is not a small group for external audit purposes, to which Group Supervision 2.1(1) or 2.1(2) applies and where the PRA is the group supervisor, to a relevant insurance group undertaking; and
4. (4) to an external auditor of such a firm or group.

1.2

This Part applies to a firm or a relevant insurance group undertaking, as the case may be, in respect of financial years ending on or after 15 November 2016.

1.3

In this Part, the following definitions shall apply:

annual quantitative reporting template

means a reporting template set out in EU Regulation 2015/2450 or any other relevant Solvency II Regulations.

corporate pensions business

means one or more pension schemes managed by an insurer on behalf of an employer and for which liabilities are calculated by the insurer only at scheme level.

delegated act

means Commission Delegated Regulation (EU) 2015/35 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II)

general insurance best estimate liability

means:

1. (1) the sum of items entered under row codes R0010, R0370, R0380, R0410 and R0420, column code C0180, of the annual quantitative reporting template S17.01.01; plus
2. (2) the sum of items entered under row codes R0010 and R0030, column codes C0090, C0140 and C0190, of the annual quantitative reporting template S12.01.01,

in each case as required to be reported to the PRA for the relevant financial year end.

general insurance gross written premium

means the total of items entered under row codes R0110, R0120 and R0130, as expressed in column code C0200 where this column is completed for those row codes, of the annual quantitative reporting template S.05.01.01, in each case as required to be reported to the PRA for the relevant financial year end.

group supervisor

means (in relation to a group) the authority designated as group supervisor in relation to that group, in accordance with Article 247 of the Solvency II Directive.

life insurance best estimate liability

means:

1. (1) the sum of items entered under row codes R0010 and R0030, column codes C0150 and C0210 of the annual quantitative reporting template S12.01.01; minus
2. (2) the sum of items entered under row codes R0010 and R0030, column codes C0090, C0140 and C0190 of the annual quantitative reporting template S12.01.01; minus
3. (3) corporate pensions business reported under column code C0180 of the annual quantitative reporting template S14.01.01,

in each case as required to be reported to the PRA for the relevant financial year end.

life insurance gross written premium

means:

1. (1) the item entered under row code R1410, column code C0300 of the annual quantitative reporting template S05.01.01; minus
2. (2) corporate pensions business under column code C0060 of the annual quantitative reporting template S14.01.01,

in each case as required to be reported to the PRA for the relevant financial year end.

relevant elements of the SFCR

means the templates and information in 2.2

score

means for the relevant financial year end the sum of the following:

1. (1) general insurance gross written premium x (6.71 x 10^-7);
2. (2) general insurance best estimate liability x (3.97 x 10^-8);
3. (3) life insurance gross written premium x (3.11 x 10^-7); and
4. (4) life insurance best estimate liability x (1.18 x 10^-8),

1. where:
1. (a) each of the four components to the calculation of score is floored at a zero value, such that where any calculation at (1) to (4) produces a negative number, that number shall be substituted with a zero; and
2. (b) general insurance gross written premium, general insurance best estimate liability, life insurance gross written premium and life insurance best estimate liability are all expressed in pounds sterling. Where a firm reports in a currency other than pounds sterling, this means the relevant reported figures converted into pounds sterling using the daily spot exchange rate as published on the Bank of England website applicable on the “as at date” of the reporting.

SFCR Implementing Technical Standard

means Commission Implementing Regulation (EU) No. of 2015/2452 laying down implementing technical standards with regard to the procedures, formats and templates of the solvency and financial condition report according to Directive 2009/138/EC of the European Parliament of the Council

small firm for external audit purposes

1. (1) For the purposes of external audit of a SFCR relating to a financial year ending
   on or after 15 November 2018 but before 15 November 2019, means a UK Solvency II firm where its score is less than 100.
2. (2) For the purposes of external audit of a SFCR relating to a financial year ending
   on or after 15 November 2019, means a UK Solvency II firm where:
1. (a) its score is less than 100 for its two most recent financial year ends; or
2. (b) its score is greater than 100, if the financial year end to which the score relates immediately follows a financial year end in which that UK Solvency II firm met the condition in (2)(a).

small group for external audit purposes

means a group in which every UK Solvency II firm in the group is a small firm for external audit purposes.

2.1

A firm or a relevant insurance group undertaking must ensure that the external auditor provides a report which includes an opinion about the relevant elements of the SFCR in accordance with 4.

2.2

The relevant elements of the SFCR are:

1. (1) Subject to (3), (4) and 4.2, the information that a firm and a group discloses pursuant to Article 296, 297, and 359(d) and (e) of the delegated act;
2. (2) Subject to (3), (4) and 4.2 and where appropriate, the following templates that are provided in the SFCR Implementing Technical Standard;
1. (a) S.02.01.02
2. (b) S.12.01.02
3. (c) S.17.01.02
4. (d) S.22.01.21
5. (e) S.22.01.22
6. (f) S.23.01.01
7. (g) S.23.01.22
8. (h) S.25.01.21
9. (i) S.25.01.22
10. (j) S.28.01.01
11. (k) S.28.02.01
12. (l) S.32.01.22
3. (3) Where the information in 2.2(1) and 2.2(2) is, or derives from, the SCR that information shall only be subject to external audit for firms calculating their SCR using the standard formula.
4. (4) Where the information in 2.2(1) and 2.2(2) is, or derives from, the group SCR that information shall only be subject to external audit for relevant insurance group undertakings calculating their group SCR using the standard formula.

3.1

A firm or a relevant insurance group undertaking must:

1. (1) appoint an external auditor in accordance with Auditors 2, 3 and 4 to perform the functions in 2; and
2. (2) submit the report to the PRA and disclose it publicly with the firm’s SFCR.

4.1

Subject to 4.2, an external auditor appointed by a firm or relevant insurance group undertaking pursuant to 3 must:

1. (1) undertake a reasonable assurance engagement on relevant elements of the SFCR;
2. (2) produce a report that includes an opinion addressed to the governing body confirming that the relevant elements of the SFCR are prepared in all material respects in accordance with the PRA rules and Solvency II Regulations on which it is based;
3. (3) read and consider all information disclosed by the firm in its SFCR that is not a relevant element of the SFCR to identify material inconsistencies with the relevant elements of the SFCR and any knowledge obtained during the course of the audit of the SFCR engagement and (where applicable) audit of the financial statements.

4.2

Where the relevant elements of the SFCR in a group SFCR that:

1. (1) pertains to an undertaking that is not a Solvency II undertaking; and
2. (2) information has been prepared in accordance with:
1. (a) PRA rules other than those implementing the Solvency II Directive; or
2. (b) an EU instrument other than the Solvency II Regulations,

the external auditor shall state in the report under 4.1(2) that the information has been properly compiled in accordance with the relevant PRA rules and EU instruments relating to that undertaking from information provided by undertakings in the group and the relevant insurance group undertaking.

4.3

The Report in 4 must be prepared with due, skill, care and diligence.