Insurance regulatory news, March 2021 # 4

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This week, reports on recent UK regulatory developments of interest to insurers and their intermediaries. See also our Financial institutions general regulatory news in the Related Materials links.

Contents

  • UK Solvency II: PRA PS2/21 on expectations for work of external auditors on matching adjustment
  • COVID-19: FCA list of business interruption insurance policies
  • UK insurance sector regulation: PRA speech

UK Solvency II: PRA PS2/21 on expectations for work of external auditors on matching adjustment

The UK Prudential Regulation Authority (PRA) has published a policy statement, PS2/21, setting out its expectations for the work of external auditors on the matching adjustment (MA) under the UK Solvency II regime.

In PS2/21, the PRA provides feedback to its June 2020 consultation paper, CP11/20, and gives its final policy in the form of an updated Supervisory Statement, SS11/16: "Solvency II: External audit of, and responsibilities of the governing body in relation to, the public disclosure requirement".

The PRA has made some changes to the draft policy as a result of the responses, details of which are set out in Chapter 2. It has also made several minor editorial amendments to improve the clarity and readability of SS11/16. The PRA considers that these changes make the final policy clearer and do not result in any additional requirements for firms or auditors compared to the original proposals.

The updated version of SS11/16 will replace the existing version on 1 July 2021. The new expectations in the updated SS11/16 will come into effect for audits in respect of accounting periods ending on or after this date.

COVID-19: FCA list of business interruption insurance policies

The Financial Conduct Authority (FCA) has updated its webpage on its test case on business interruption (BI) insurance during the COVID-19 pandemic. It has published a list of BI insurance policies capable of responding to the COVID-19 pandemic. The list was compiled following an information request sent by the FCA to insurers for updated details of all non-damage BI policies that are, in principle, capable of responding to the pandemic following the Supreme Court judgment.

The policies listed cover over 200,000 policyholders and may be subject to further update. Inclusion in this list does not mean that the outcome on any particular claim for the policy wordings will be affected. Each policy wording and policyholder's circumstances will need to be considered on a case-by-case basis. Where a policy is not included on this list, this may be for a number of reasons, including but not limited to the policy wording being of a type not tested in the test case (for example, containing an exhaustive list of diseases only or where the policy contains a relevant exclusion clause which was not tested). The list also does not include policy wordings which are only held by fewer than five policyholders.

UK insurance sector regulation: PRA speech

The PRA has published a speech by Sam Woods, Bank of England (BoE) Deputy Governor for Prudential Regulation and PRA CEO, in which he considers the ways in which regulation of the UK insurance sector is set to change and also comments on the government's Solvency II regime review.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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