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12th January 2020
PRA issues Solvency II: Longevity risk transfers–simplification of pre-notification expectations - PS1/20
A new Prudential Regulation Authority(PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 3/19 ‘Solvency II: Longevity risk transfers– simplification of pre notification expectations’. It also contains the PRA’s final policy in an updated version of Supervisory Statement (SS) 18/16 ‘Solvency II: longevity risk transfers’.
The PRA received one response to the CP. The respondent was welcoming of the overall proposals and intention of the CP. The response highlighted areas where the proposed reporting template may be unclear and expressed reservation about basis risk being singled out for specific additional focus.
After considering the response, the PRA has decided to make two clarifications to the draft policy:
-to amend the headings used in the reporting template, providing more clarity on how firms should complete them, including explanatory footnotes; and
-a change to the phrasing on how firms should include basis risk in their risk assessments of longevity risk transfers.
This policy will take effect on the publication of this PS. From that point, firms will be expected to notify the PRA of new longevity risk transfers according to the text of the revised SS.
The policy set out in this PS has been designed in the context of the current UK and EU regulatory framework. The PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework, including those arising once any new arrangements with the European Union take effect.
In the event that the UK leaves the EU with no implementation period in place, the PRA has assessed that the policy would not need to be amended under the EU (Withdrawal) Act 2018 (EUWA).
The final SS attached to this PS should be read in conjunction with SS1/19 ‘Non-binding PRA materials: The PRA’s approach after the UK’s withdrawal from the EU’.
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