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PRA Consultation Paper (CP2/18) – Changes in insurance regulatory requirements

15 January 2018
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The PRA has proposed a number of regulatory reporting changes designed to reduce the burden for Solvency II firms and mutuals. Changes would be made to the application for quarterly reporting waivers for category 3, 4 and 5 firms and to eight of the thirteen National Specific Templates (“NSTs”).

For quarterly reporting, the PRA is proposing that Category 4 and 5 firms no longer have to formally apply for a waiver, and instead a waiver by consent would be available to any firm which requires it. For category 3 firms, the PRA would review waiver applications on a case by case basis rather than on an exceptional basis only.

Changes to the NSTs would be as follows:
• NS.01 With-profits value of bonus – only firms with best estimate liabilities in excess of £500mn would be required to fill this in.
• NS.02 With-profits assets and liabilities – only firms with best estimate liabilities in excess of £500mn would be required to fill this in.
• NS.05 Revenue account life – reconciliation of assets at the start and finish on a net basis would no longer be required.
• NS.06 Business model analysis (life) – the best estimate liabilities and risk margin would be reported before adjustment for the transitional measure on technical provisions; furthermore this would now be reported as a separate item.
• NS.07 Business model analysis (non-life) – there would be a complete overhaul of this template. Changes include: aligning the lines of business classification to those in template S.05.01; splitting written premiums by new and renewal, and by direct and accepted reinsurance; requiring the same information for all business plan years; introduction of new items relating to business model analysis.
• NS.09 Best estimate assumptions for life insurance risks – firms would be exempt from reporting sub-categories 2 and 3 if the previous line covers 50% of the business for that product (in terms of the number of policies).
• NS.10 Projection of future cash flows (Best Estimate – non life: liability claim types) – a much simplified version of the template is proposed, although all general insurers would now be required to submit this form (currently they only need to do so if they carry one of eight specified classes of business), but a null form would be permitted if a firm has no such liabilities. A revised list of claim types is proposed, whilst only the sum of cash-flows would be required.
• NS.11 Non-life claim development information – this form would be aligned with S.19.01 and also remove information relating to inflation.

As a consequence of the above proposals, the PRA would update the NST LOG files to be implemented for the financial year-end 2018 submissions.

In addition, the PRA is proposing extending the exemption from the submission of the Annual Controllers Report from Friendly Societies to also include mutuals.

The consultation closes on Friday 13 April 2018.