Prudential Regulation Authority Rulebook

8.1

Assumptions on future management actions shall only be considered realistic for the purposes of 3.1(2)(a) in the Technical Provisions Part where they meet all of the following conditions:

1. (1) the assumptions on future management actions are determined in an objective manner;
2. (2) assumed future management actions are consistent with the firm’s current business practice and business strategy, including the use of risk-mitigation techniques; where there is sufficient evidence that the firm will change its practices or strategy, the assumed future management actions are consistent with the changed practices or strategy;
3. (3) assumed future management actions are consistent with each other;
4. (4) assumed future management actions are not contrary to any obligations towards policyholders or to legal requirements applicable to the firm; and
5. (5) assumed future management actions take account of any public indications by the firm as to the actions that it would expect to take or not take.

8.2

Assumptions about future management actions shall be realistic and include all of the following:

1. (1) a comparison of assumed future management actions with management actions taken previously by the firm;
2. (2) a comparison of future management actions taken into account in the current and in the past calculations of the best estimate; and
3. (3) an assessment of the impact of changes in the assumptions on future management actions on the value of the technical provisions.

A firm must be able to explain any relevant deviations in relation to (1) and (2) to the PRA and, where changes in an assumption on future management actions have a significant impact on the technical provisions, the reasons for that sensitivity and how the sensitivity is taken into account in the decision-making process of the firm.

8.3

For the purpose of 8.1, a firm must establish a comprehensive future management actions plan, approved by the governing body of the firm, which provides for all of the following:

1. (1) the identification of future management actions that are relevant to the valuation of the technical provisions;
2. (2) the identification of the specific circumstances in which the firm would reasonably expect to carry out each respective future management action referred to in 8.3(1);
3. (3) the identification of the specific circumstances in which the firm may not be able to carry out each respective future management action referred to in 8.3(1), and a description of how those circumstances are considered in the calculation of technical provisions;
4. (4) the order in which future management actions referred to in 8.3(1) would be carried out and the governance requirements applicable to those future management actions;
5. (5) a description of any on-going work required to ensure that the firm is in a position to carry out each respective future management action referred to in 8.3(1);
6. (6) a description of how the future management actions referred to in 8.3(1) have been reflected in the calculation of the best estimate; and
7. (7) a description of the applicable internal reporting procedures that cover the future management actions referred to in 8.3(1) included in the calculation of the best estimate.

8.4

Assumptions about future management actions must take account of the time needed to implement the management actions and any expenses caused by them.

8.5

The system for ensuring the transmission of information shall only be considered to be effective for the purpose of 2.2 of the Conditions Governing Business Part where the reporting procedures referred to in 8.3(7) include at least an annual communication to the governing body.