PRA publishes the Quantitative Impact Study
The Quantitative Impact Study (QIS) was published by PRA on July 20 2021 with firms given three months to respond. The cut-off date for QIS submissions is 20 October 2021, with replies required to be submitted via BEEDS.
The background for this exercise comes from the Government’s response to its ‘Call for Evidence’ for the Solvency II review, asking PRA to model different options and what the impact would be.
This QIS is a data gathering exercise to contribute to the Solvency II review and support the PRA’s analysis of potential reform possibilities. It will largely apply to quantitative requirements on an insurer’s balance sheet but there will also be some qualitative questions. The PRA has made it clear that the items included in the QIS are not its final proposals, but will help it develop proposals.
The QIS is relevant to all PRA-regulated insurance companies. It is voluntary to participate in the QIS, although the PRA has approached some firms to strongly request they take part. We expect this to be the case for the largest firms. However, all firms are strongly encouraged to take part and share relevant features with them in order for the PRA to comprehend the likely effect of reforms on diverse insurance segments, as well as the insurance industry as a whole. Indeed, the PRA incentivises firms to be involved with the QIS sooner rather than later in order to make any comments or questions within the first weeks.
Three main operational modules will be taken into account: matching adjustment (MA), risk margin and transitional measure on technical provisions (TMTP), although, only risk margin might be important for small companies. Please notice that the standard formula is not covered by the QIS.
It is crucial for the PRA to receive excellent quality data from the QIS. Therefore, SDA is in a good position to assist firms to engage, taking a suitable level of review before it is submitted, so please get in touch if you would like to discuss.
See Review of Solvency II: QIS | PRA for more information.
Additionally, the PRA has also issued a Dear CEO letter that sets out its method for the QIS. The letter summarises the aims of the Solvency II review, describes the scope of the QIS and explains the rational on two items being evaluated under it, the MA and the risk margin.
In conclusion, the PRA is expected to produce a comprehensive variety of prospective results from the calibrations against the data collected.