Following the release of the preparatory guidelines by the European Insurance and Occupational Pensions Authority (‘EIOPA’) last month, the PRA has today issued a consultation paper setting out its expectations of firms.
Janine Hawes, insurance director at KPMG, commented: "One of the key concerns has been how the PRA will effect these guidelines. The proposals today include no suggestion that the PRA will apply additional requirements above the guidelines or make any rulebook changes, both of which will be welcomed by industry.
“However, 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.
“Some of the guidelines will present a significant burden for smaller insurers that have fewer resources available, and their rate of progress could be slower as a result. The 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.
The EIOPA papers made it clear that regulators would not be able to take enforcement action “in the case of non-compliance with Solvency II during this preparatory period, but were silent on non-compliance with the guidelines. Today’s paper does not address this question, but there is no doubt that the PRA intends firms to make their best efforts to comply.”
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