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PRA consultation CP 22-19 Solvency II Prudent Person Principle

PRA consultation CP 22/19: Solvency II: Prudent Person Principle

Background

  • CP 22/19 – Solvency II: Prudent Person Principle
  • Published by the PRA on 18 September 2019
  • In this consultation paper (CP), the Prudential Regulation Authority (PRA) sets out its proposed expectations for investment by firms in accordance with the Prudent Person Principle (PPP) as set out in Chapters 2 to 5 of the Investments Part of the PRA Rulebook (which transpose Article 132 of the Solvency II Directive (2009/138/EC) (‘Solvency II’)).

Impacts

In accordance with Solvency II, the PRA rules require that ‘as regards investment risk, a firm must demonstrate that it complies with the Investments Part of the PRA Rulebook.’ In the scope of the Solvency II supervisory review process, the PRA’s supervision of firms includes reviewing and evaluating firms’ compliance with (among other matters) the PRA rules transposing the Solvency II prudent person investment requirements. The draft Supervisory Statement (SS) (see appendix) sets out the PRA’s proposed expectations of firms relating to the PPP as set out in Investments Chapters 2 to 5 of the PRA Rulebook.

The proposals are relevant to all UK Solvency II firms (including in the context of provisions relating to Solvency II groups), mutuals, third-country branches, the Society of Lloyd’s (the Society) and its managing agents (collectively, ‘firms’).

The proposals set out in this CP have been designed in the context of the current UK and EU regulatory framework. The PRA has assessed that the proposals will be affected in the event that the UK leaves the EU with no implementation period in place.

Timeline with relevant dates to be logged on regulatory calendar

  • Consultation opens on 18 September 2019
  • Consultation closes on 18 December 2019

Next steps

Any respondents need to send comments to the PRA.