The Prudential Regulation Authority is seeking views on how it plans to implement and interpret European Solvency II regulations and what it expects insurance firms to do to prepare
In September, the European Insurance and Occupational Pensions Authority published its final guidance for Solvency II. But it announced earlier this month that it would postpone the application date of the Directive to 1 January 2016.
The PRA consultation, issued yesterday, provides clarity on three areas: expectation of firms as they prepare for Solvency II; the PRA's approach to implementing the guidelines; and its interpretation of aspects of the guidelines.
'Many of the guidelines represent good practice in conformity with existing rules and should not present an additional burden for firms,' the PRA said.
'The PRA will consider ways that firms may be able to use their preparatory Solvency II work to meet existing regulatory requirements.'
However, KPMG insurance director Janine Hawes said the consultation indicated that the PRA had shifted its approach towards adoption of the EIOPA guidelines.
'It does now appear that the PRA is likely to adopt all of the guidelines, including the narrative reporting that it had previously indicated it was minded not to adopt. This is not unexpected, given the requirement for all regulators to make every effort to comply,' she said.
Hawes added that some of the guidelines would present a significant burden for smaller insurers that have fewer resources available, and their rate of progress could be slower as a result.
'The [PRA] paper specifically states that firms should apply the guidelines in a way that is appropriate to the nature, scale and complexity of their business but, at this stage, it remains unclear how the principle of proportionality will be applied in practice,' she said.
The PRA consultation closes November 15.