4. Solvency II update Catherine Beech 9 October

Agenda 4.1 European policy update 4.2 EIOPA’s preparatory guidelines 4.3 PRA’s approach to the preparatory phase 4.4 What this means for smaller insurers 2

4.1 European policy update Implementation date –The PRA planning horizon remains 1 January 2016 Solvency II (amended by Omnibus II Directive) –Amends the Level 1 text Level 2 and Level 3 text –Will follow the publication of the Level 1 text These texts contain more detailed implementing measures and guidance 3

4 These are aimed at supporting regulators and firms in preparing for Solvency II. They cover four main areas which EIOPA considers fundamental for effective implementation. The four areas are: Systems of Governance; Forward looking assessment of the undertaking’s own risks (based on the ORSA principles); Reporting; and Pre-application for internal models. A link to EIOPA’s final guidelines, feedback statements and annexes was made available on the PRA website on 27 September EIOPA’s preparatory guidelines

4.3 PRA’s approach to the preparatory phase PRA approach to considering the preparatory guidelines This is not early implementation of Solvency II. The PRA supports EIOPA’s proportionate and pragmatic approach in preparation for the implementation of Solvency II. The PRA will apply the guidelines to firms in a proportionate and risk-based manner, consistent with the PRA’s overall approach to insurance supervision. The PRA expects firms to make the necessary preparations to be compliant with the relevant requirements for the Solvency II regime at implementation. PRA approach to setting expectations of the UK insurance industry We aim to publish a draft PRA Supervisory Statement for consultation in October. This will set out the PRA’s expectation of firms. We will issue a final Supervisory Statement in December, and support this with industry communications, including briefing sessions for firms. 5

4.4 What this means for smaller insurers Smaller insurers should continue to: ensure that they meet the current regulatory requirements; and submit six monthly Solvency 2 progress statements when requested. We encourage firms to: keep abreast of developments in Solvency II – the PRA will post news at and firms should also refer to the websites of European policy institutions, e.g. EIOPA, European Commission and Parliament; be familiar with EIOPA’s preparatory guidelines that apply to them; refer to the PRA’s Supervisory Statement to understand the expectations of firms; and make the necessary preparations towards full compliance of Solvency II at implementation. 6