Multinational insurers with offices outside the EU will need to define how they are supervised as a group under the Solvency II directive.
31 JULY 2015 | BY CINTIA CHEONG
The Prudential Regulatory Authority (PRA) said firms should define "as a matter of urgency" whether they are part of an insurance group within a financial conglomerate, because this would affect their Solvency II requirements.
Jonathan Drake, partner at Bond Dickinson, said defining a group would be a challenge. "It's a particular problem for insurers in the UK whose ultimate parent companies are outside the EU, because of the way in which the directive sets up the requirements for where supervision has to take place," he said.
He said the next consideration was which jurisdiction the group is supervised from. "If the group overall is an EU-headquartered group, then that doesn't pose any problems," he said.
But if a UK firm has a holding company outside the EU then "there are questions where the supervision of that group should take place".
If the ultimate holding company is based in a jurisdiction with an equivalent to Solvency II, then those rules would apply, but if the company was based in a jurisdiction with no "equivalence", this could impact the way the regulator assesses it, Drake said.
According to the PRA, if the ultimate holding company is not based in a jurisdiction with an equivalence, the PRA may decide to apply the requirements of the directive to the worldwide group "as if it were based in the European Economic Area" or it may use "other methods" to define the objectives of group supervision.
The PRA said firms could apply for a waiver which would be assessed on a case-by-case basis.