London

5 Chancery Lane
London
WC2A 1LG
01235 821 160
View map

Edinburgh

1 Lochrin Square
92 Fountainbridge
Edinburgh
EH3 9QA
01235 821 160
View map

Dublin Office

77 Lower Camden Street
Dublin 2
Ireland
D 02 XE 80

View map

Administrative Office

BH Office
Church Street
Ardington
Wantage
Oxfordshire
OX12 8QA
01235 821 160
View map

Send us a message
CLOSE X
Contact Us
12.07.2021

PRA Review of Solvency II Quantitative Impact Study – what to look out for

***

The PRA announced the details of what is included in the QIS on July 20th. Please see the following article for a summary of these requirements: https://aprllp.com/pra-review-of-solvency-ii-quantitative-impact-study-whats-included/

***

As you may be aware, the PRA have created a holding page on their website (here) where they plan to release further details of a Quantitative Impact Study (QIS). This is the next step in the development of post-Brexit reforms to the UK Solvency regime for insurers, following the HM Treasury Call for Evidence that ran over the turn of the year. The necessary templates and additional guidance are expected to be published over the summer, with firms then having 3 months to respond.

The main scope of the QIS is as follows:

Further qualitative questions will also be included to help “support the development of some areas of Solvency II reform that are less straightforward to assess quantitatively”. From this scope, we can see that the bulk of the calculation effort is likely to fall on life insurers, but the PRA is strongly encouraging regulated entities from all sectors to respond to help understand the impact of potential developments across the whole insurance industry.

Our initial view is that the bulk of the complexity within responding to the QIS will come from the first item relating to the calculation of the MA. The speech given by Charlotte Gerken of the PRA on the supervision of UK annuity providers on 29 April (here) discusses the effectiveness of a range of aspects of the current MA regime, and may signal areas that the QIS might test. These include:

For the risk margin and TMTP elements, areas that could be covered include changes to the much maligned 6% cost of capital assumption within the risk margin calculation and changes to the TMTP run-off period and frequency of recalculations.

We are looking forward to seeing what is included in the QIS and gaining insight into what changes to SII may be proposed in the future. Within APR we have a high level of experience of SII and in each of the areas in scope of the QIS, including senior qualified actuaries with in-depth practical expertise with MA and experience of managing delivery of insurer submissions to previous SII QIS exercises. Along with the aptitude and technical proficiency of our more junior staff, we feel that we are well-placed to support our clients in this exercise.

If you require additional support in producing your response to the QIS then please get in touch via email (ross.gordon@aprllp.com) to discuss further.

Ross Gordon

July 2021