OAC has called for the Prudential Regulatory Authority (PRA) to offer greater flexibility for with-profit companies rather than gold plating Solvency II requirements. The PRA is prescribing a detailed method for firms to calculate their with-profits liabilities under Solvency II creating more work for firms that will not offer additional security either for them or their customers.
The PRA is currently consulting on how to transpose the upcoming Solvency II regulation and has asked firms to feed into this process. One of the areas under consultation is the definition of with-profit assets and liabilities.
David Lechmere, Head of Actuarial, at OAC says:
“We are concerned that the PRA is taking a very prescriptive approach to the calculation of with-profits liabilities which is not required by the Directive. The original requirements are sufficient to protect all parties and therefore the text should simply align with the requirements of the Directive."
Lechmere continued:
“If the PRA goes ahead with its plans then it will actually create a conflict for firms because the Directive requires separate calculation of the value of the guaranteed benefits and the value of the discretionary additions for the purpose of the SCR.”
The calls come as OAC’s Christopher Critchlow makes a speech about the future of the with-profits industry at the Institute and Faculty of Actuaries Life Conference being held in Birmingham this week.
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