PRA expects to issue Solvency UK consultations in June and September

Written by Adam Cadle

21/02/2023

The PRA is expecting to issue two Solvency UK consultations, one in June and one in September, “rather than a Big Bang implementation”, the regulator’s chief executive Sam Woods has said.

In a speech given at the ABI Dinner, Woods said “firms will have a very good sense well before the end of 2023 of how we expect the new regime to operate, so that they can begin to adapt their investment plans as soon as they wish”.

Woods spoke about plans to implement a significant streamlining of the rules for internal model approvals.

“It is vital that the model approval process is very robust, given it leads directly to the setting of capital requirements. But the mandated process we have inherited from the EU is much too bureaucratic – we intend to do away with around 70% of the nearly 200 internal model tests and standards, alongside other changes. I want to emphasise that is this not meant to be a lowering of the standards.”

Woods said the industry should expect the PRA to continue to focus hard on the adequacy of valuations and ratings for assets in matching adjustment portfolios, given the very heavy reliance the regime has on them. On the issue of the fundamental spread, Woods compared it to the other “truly fundamental spread” – Marmite.

“Some love it, some hate it, some – including the entirety of the general insurance sector in this room – are perfectly indifferent and somewhat sick of hearing about it. So let me put it on the record that I love Marmite and that it’s definitely my favourite fundamental spread I did try the other fundamental spread on a piece of sourdough once but it really didn’t taste good at all. But in the context of Solvency II reform, I sometimes feel that we have an enormous jar of Marmite which is crowding out of view the numerous other things we are serving for breakfast.”

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