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PRA consultation CP 23-19 Solvency II Income and internal credit assessments

PRA consultation CP 23/19: Solvency II: Income and internal credit assessments

Background

  • CP 23/19 – Solvency II: Income producing real estate loans and internal credit assessments for illiquid, unrated assets
  • Published by the PRA on 27 September 2019
  • This consultation paper (CP) set outs the Prudential Regulation Authority’s (PRA) proposed expectations of firms in respect of their modelling of income producing real estate (IPRE) loans within their Solvency II internal models. It also proposes amendments to its expectations in respect of the use of internal credit assessments for assigning fundamental spreads for illiquid, unrated assets.
  • The proposals in this CP would result in changes to Supervisory Statement (SS) 3/17, ‘Solvency II: Matching adjustment – illiquid unrated assets and equity release mortgages’

Impacts

The CP is relevant to UK insurance and reinsurance companies holding or intending to hold IPRE loans. It is also relevant to firms investing in illiquid, unrated assets within their Solvency II matching adjustment (MA) portfolios.

The proposals set out in this CP have been designed in the context of the current UK and EU regulatory framework. The PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework, including those arising once any new arrangements with the European Union take effect.

In the event that the UK leaves the EU with no implementation period in place, the PRA has assessed that the proposals would not need to be amended under the EU (Withdrawal) Act 2018 (EUWA).

Timeline with relevant dates to be logged on regulatory calendar

  • Consultation opens on 27 September 2019
  • Consultation closes on 27 December 2019
  • Proposed implementation date is 31 March 2020

Next steps

Any respondents need to send comments to the PRA.

The proposed implementation date for the proposals in this CP is Tuesday 31 March 2020

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