PRA Launches Quantitative Impact Study (QIS) to Assist Solvency II ReviewPRA / Bank of England
17 June 2021
In her speech of 15 June 2021, Anna Sweeney, PRA’s Insurance Executive Director, gave notice of a data gathering exercise to inform possible reform of the Solvency II regime.
The QIS will be released over the summer and the regulator seeks high-quality data within a period of around 3 months. This will require significant resource from firms.
Participation is voluntary although the PRA “will be writing to a variety of firms in each sector strongly encouraging them to participate”.
Anna Sweeney pointedly states “nothing in the QIS is a proposal itself.” The QIS will focus on areas of potential policy change which are the easiest to quantify and have a more obvious immediate balance sheet impact – the risk margin, the matching adjustment and elements of the transitional measure on technical provisions. The first is relevant to all Solvency II firms, the second is primarily of interest to annuity providers and the third is relevant to those firms who elected to spread the impact of switching to the Solvency II regime (meeting the various conditions).
The PRA plans to produce a consultation paper on simplifications to the Solvency II reporting process.
Large firms using internal models will be interested to hear of potential streamlining of the process for approving internal models and model changes.
Throughout her speech, the Director emphasises a particular objective - making sure policyholders continue to be appropriately protected. This is a key consideration underlying the other 2 objectives underpinning the Solvency II review – competition and productive and responsible investment.
On 16 June 2021, the PRA launched the Review of Solvency II: Quantitative Impact Study (QIS) page, setting out supporting information.
Cara Spinks commented 'Whilst participation in the QIS is voluntary, and larger firms are more likely to have the capacity to take part, we think it will be important for smaller firms to engage where they can, to ensure that the potential impact of any reforms on smaller firms is taken into account.'
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