PRA releases statement on the recalculation of TMTP

The PRA has released its statement to insurance firms inviting them to recalculate the Transitional Measure on Technical Provisions (TMTP).

In accordance with Supervisory Statement (SS) 6/16 ‘Maintenance of the transitional measure on technical provisions’ under Solvency II’, the PRA has been actively monitoring market conditions since the previous biennial recalculation of TMTP in December 2021. The PRA also assesses whether any changes in market conditions since the last recalculation can be considered sustained. Based on the PRA’s evaluation, the fluctuations in risk-free rates observed during the first half of 2023 meet the threshold for a significant alteration in market conditions outlined in SS6/16, potentially impacting the risk profile of firms.

Firms are welcome to submit applications to the PRA for recalculating TMTP as at Friday, 30 June 2023. When making an application, firms are expected to provide evidence demonstrating a substantial change in their risk profile.

In order to expedite the application process, the PRA expects firms to use their existing TMTP calculation methodologies within their application.

Jasmine Zacher