FIN.

Statutory instruments published for UK Solvency II regime review

On 8 December 2023, statutory instruments for the UK Solvency II regime were published. The Insurance and Reinsurance Undertakings (Prudential Requirements) (Risk Margin) Regulations 2023 (SI 2023/1346) and the The Insurance and Reinsurance Undertakings (Prudential Requirements) Regulations 2023 (SI 2023/1347) are now available on www.legislation.gov.uk.

The Risk Margin Regulations make amendments to Articles 37, 39 and 312 of the UK Solvency II Delegated Regulation and regulation 54 of the Solvency 2 Regulations 2015.

The Risk Margin Regulations:
  • reduce the amount of risk margin that insurers are required hold;
  • revise some of the requirements for insurance and reinsurance undertakings to make reports to the PRA;
  • change the criteria for the PRA to revoke an approval to apply a transitional deduction to an undertaking’s technical provisions.
The Risk Margin Regulations come into force on 31 December 2023.
The Prudential Requirements Regulations reiterate certain provisions of  Articles 53 and 54 of the UK Solvency II Delegated Regulation and provisions of regulations 4B and 42 of the Solvency 2 Regulations 2015. HM Treasury has indicated within the explanatory note to the Prudential Requirements Regulations that these provisions will be revoked with effect from 30 June 2024.
The Prudential Requirements Regulations stipulate:
  • the PRA must publish technical information for the purpose of calculating an insurance or reinsurance undertaking’s technical provisions and the solvency capital requirement (SCR) on the basis of the standard formula;
  • the PRA should grant an insurance or reinsurance undertaking approval to apply a matching adjustment provided the undertaking meets the specified conditions;
  • calculation methodologies for the matching adjustment and fundamental spread.
The Prudential Requirements Regulations come into force on 30 June 2024, except regulation 7 (PRA’s powers to make rules) which comes into force on 1 April 2024.

Jasmine Zacher