Prudential Regulation Authority
Solvency II - PRA publishes policy statement on deep, liquid and transparent assessments and GBP transition to SONIA - 3 June 2021
The PRA has published a policy statement (PS12/21) on deep, liquid and transparent (DLT) assessments and GBP transition to the Sterling Overnight Index Average (SONIA), under the Solvency II Directive (2009/138/EC) regime. The policy statement is relevant to all UK Solvency II firms and the Lloyd’s Society and its managing agents, but does not apply to non-Directive firms.
The policy statement provides feedback on the PRA’s consultation paper (CP1/21), published in January 2021 and notes that respondents generally welcomed the PRA’s proposals on DLT assessments; the publication of indicative SONIA overnight index swap (OIS) based curves; the credit risk adjustment for SONIA OIS; the long term average spread; the transitional measure on technical positions; matching adjustment applications; and internal models. The PRA has made a number of minor changes to its draft policy as proposed in its consultation paper, which are set out in Chapter 2 of the policy statement.
Appendix 1 of the policy statement sets out the final version of its updated Statement of Policy: ‘The PRA’s approach to the publication of Solvency II technical information’ and Appendix 2 contains the results of the first DLT assessment of the SONIA OIS market.
The new policy takes effect on 3 June 2021. Transition to the new GBP risk-free rate will take effect on the publication of technical information with reference dates from and including 31 July 2021. The PRA explains that this means that the GBP risk-free rates that the PRA will use when calculating daily spread figures (for example, for the long term average spread calculation) will be based on LIBOR swap rates for dates up to and including 30 June 2021, and will switch to SONIA OIS rates for dates from and including 1 July 2021.
Policy statement: Solvency II: Deep, liquid and transparency assessments, and GBP transition to SONIA (PS12/21)
Appendix I: The PRA’s approach to the publication of Solvency II technical information
Appendix II: Technical information for Solvency II firms
Updated webpage
Report
Consultation paper: Solvency II: Deep, liquid and transparent assessments, and GBP transition to SONIA (CP1/21)
Financial Conduct Authority
General insurance pricing practices - FCA publishes policy statement - 28 May 2021
The FCA has published a policy statement on FCA Handbook changes to improve competition and protect home and motor insurance customers from loyalty penalties (PS21/5). The policy statement also summarises the feedback received on the FCA’s consultation paper (CP20/19) and its final report on its market study on general insurance pricing practices, both published in September 2020.
The final rules are in the Non-Investment Insurance Product Governance, Premium Finance, General Insurance Auto-Renewal and Home and Motor Insurance Pricing Instrument 2021 (FCA 2021/19), which is set out in Appendix 1 of PS21/5. The rules consist of a package of measures, including:
- a requirement that when a firm offers a renewal price to an existing customer, that price should be no greater than the equivalent new business price for a new customer;
- changes to the FCA’s existing product governance rules to ensure firms have in place processes to provide products that offer fair value to customers;
- rules requiring firms to offer a range of accessible and easy options for consumers who want to cancel auto-renewal on their contracts; and
- reporting requirements to help ongoing supervision of the home and motor insurance markets and to help the FCA monitor firms.
The rules on pricing, auto-renewal and reporting will come into effect on 1 January 2022. A transitional provision for the rules on pricing and auto-renewal disclosure will give firms until 17 January 2022 to put their processes in place, provided they backdate benefits to customers to 1 January 2022. The rules on systems and controls, retail premium finance rules and product governance will come into effect on 1 October 2021. The new rules supersede the FCA’s finalised guidance on the general insurance distribution chain, which will be withdrawn when the new rules come into effect.
The FCA has also published a research paper, which contains the results of an experiment it has conducted to consider consumer perceptions of, and their responses to, discounts and incentives.
Policy statement: General insurance pricing practices market study (PS21/5)
Webpage
Research note: Discounts, Cashbacks, and Soft Toys: The Impact of Promotions on Consumer Decisions in the General Insurance Markets
Research note webpage
Infographic: Home and motor insurance
Press release
Handbook instrument (FCA 2021/19)
-
Workplace pensions - FCA publishes statement on required charges and costs - 3 June 2021
The FCA has published a statement on its expectations of workplace personal pension scheme providers in relation to their first required publication of charges and costs information.
Following a consultation in February 2019 (CP19/10), the FCA made final rules (PS20/2) requiring such providers’ Independent Governance Committees (IGCs) to publish and disclose certain administration charges and transaction cost information to members of workplace pension schemes. The first publication of this information is required by 31 July 2021, when IGCs are expected to publish their annual reports.
Following questions raised by a number of firms, the FCA clarifies that it expects the data to be published at the level of the arrangement with each individual employer and believes that employer-level comparisons could help to improve value for money in workplace pensions. The FCA explains its position by reference to statements in its consultation paper CP19/10, policy statement PS20/2 and consultation paper CP20/9.
The FCA also confirms that costs and charges data should not be published at the level of the overarching HMRC registered scheme, as aggregation of costs and charges at that level would not promote meaningful comparisons. However, given the confusion in relation to the FCA’s expectations, it has confirmed that, for this reporting year, it will not act against firms who have prepared disclosures at the registered scheme level, provided they do one of the following:
- disclose each set of costs and charges that they levy (and the number of employer schemes which have these costs and charges); or
- show the distribution of costs and charges by employer arrangement in some other way, for example by dividing the range of charges into deciles (that is, without also disclosing the relevant employer or scheme details against the costs and charges).
The FCA has also clarified that the information does not need to published in IGCs’ annual reports but must be available on a publicly accessible website.
The FCA will consider if any changes to its Handbook are necessary to provide clarity and ensure consistently good outcomes.
Statement: Publication of costs and charges data by workplace personal pension providers
Consultation paper: Publishing and disclosing costs and charges to workplace pension scheme members and amendments to COBS 19.8 (CP19/10)
Policy statement: Publishing and disclosing costs and charges to workplace pension scheme members (PS20/2)
See the General section for an item on the PRA’s policy statement (PS11/21) in relation to temporary absences of Senior Manager Functions under the Senior Managers and Certification Regime.
