Prudential Regulation Authority (PRA) CEO Andrew Bailey has said insurers in the UK require more time to comply fully with the new Solvency II capital rules, as the January 2016 deadline approaches.

Speaking at the Reuters Financial Regulation Summit, Bailey said a downward shift in the risk-free interest rate curves was affecting capital requirements, and that more insurers were likely to make use of the transitional relief allowed by the EU as a result.

According to Reuters, Bailey, who is also deputy governor for prudential regulation at the Bank of England, said: “As long as the risk-free curves remain where they are, then firms will be making greater use of the transitional capital structure in Solvency II than they thought they would.”

Under EU rules, regulators can allow insurers to apply a transitional adjustment to a risk-free interest rate term structure for up to 16 years to ensure they are compliant with Solvency II.

The deduction is the difference between the current rate and the Solvency II rate, and decreases in linear fashion over a 16-year period.

While the UK has reliable sterling market rate projections extending up to 50 years in advance, the Eurozone can only project 20 years ahead – after which it uses a rate calculated by the regulators.

Because the rate determined by regulators increases sooner than the sterling rate, Eurozone insurers could have an advantage over their UK counterparts.
“I would prefer it if everybody was done on the same basis, frankly,” commented Bailey.

“We can’t have one set of firms benefiting from one set of treatments and another set benefit from a slightly different set of treatments.”

Bailey also said that the PRA was likely to make a statement on the use of the transitional period before January 2016.

The Prudential Regulation Authority (PRA) has warned that many UK insurance companies still have a “considerable amount of work” to do in preparation for the implementation of Solvency II on 1 January 2016.

According to feedback from internal model commitment panels released last week (22 May), the PRA said that firms had to be realistic about their chances of completing further work in time to submit a viable internal model application.

In particular, the UK regulator said that some firms had decided to make changes to models at a late stage, meaning they would now have to carry out further work to demonstrate that the amendments had been properly incorporated into the model.

In order to do this, firms must ensure that any revised approaches are technically sound, and have been reviewed and agreed by internal governance processes.

The PRA noted that it was not likely to have the opportunity to review any late changes, or give further feedback to firms still seeking model approval for 1 January 2016, before they would have to make a formal application.

Because there was limited opportunity for firms to make changes once a formal application had been submitted, the PRA explained that firms had to be confident that any revisions made at this stage would satisfactorily address any previous feedback.

If firms had to make material changes during the application period, the PRA cautioned that a new formal application could be required. Alternatively, firms have a final option to “stop the clock” on their current application.

The PRA also said that all firms should have a viable contingency plan in the event that they either do not gain model approval, or a dependant Solvency II approval is rejected. It added that individual firms had already been notified about any further progress required.

However, it said that it was encouraged to see that in a number of cases firms had made changes to their models to address weaknesses identified in previous feedback.

The European Insurance and Occupational Pensions Authority (Eiopa) has announced a new EU-wide stress test for the insurance sector aimed at assessing its overall resilience.

The test will evaluate the industry’s ability to withstand shocks to the wider financial markets as well as insurance-specific challenges, ahead of Solvency II’s implementation on 1 January 2016.

According to Eiopa, the core part of the test package includes two adverse market scenarios.

These will cover sovereign debt, corporate bonds, interest rates, property and equity stresses, as well as insurance-specific shocks such as mortality, longevity, insufficient reserves and catastrophes.

Charles Garnsworthy, UK Solvency II leader at accountancy giant PwC, said: “Firms will be particularly interested at the addition of a sovereign spread stress, as to date many firms have treated sovereign debt as equivalent to risk-free with their internal models.”

The second aspect of the test will address the impact of a low investment yield environment.

Garnsworthy warned that this exercise could double the workload for firms that are required to complete the stress test at a group level and the low yields assessment at an individual entity level.

Overall, the test is set to cover at least 50 percent of the life and non-life insurance sectors by market share in each country, Eiopa said.

It will be run in co-operation with national supervisory authorities, which will collect data from insurers after 11 July.

Throughout August and September, Eiopa and the national authorities will conduct an EU-wide validation of the data, and results of the stress test analysis will be disclosed in November.

To help insurers through the process, Eiopa said it would hold a workshop in May and launch a Q&A tool throughout May and June.

Eiopa chairman Gabriel Bernardino commented: “I believe that the design and the magnitude of the shocks will properly stress insurance companies’ financial position and that the conclusions of the exercise will allow Eiopa and national supervisory authorities to define areas for further investigation.”

In conjunction with the launch of the stress test, Eiopa also published its Solvency II technical specifications, which provide insurers with a basis for the valuation of assets and liabilities as well as solvency calculations.

They will form the basis for Solvency II interim reporting during 2014 and 2015.

According to Garnsworthy, the technical specifications have not changed significantly from those used in January 2013.

“Whilst this is good news for many insurers who will not need to significantly re-build existing models or alter existing methodologies, it also means that individual firms will be required to develop and apply their own ‘house view’ on remaining key areas of uncertainty,” he explained.

London Market Insurer requires qualified Accountant experienced in insurance accounting to become a Member of the IFRS reporting team assisting the Group IFRS Reporting Manager.

Consolidation and reporting of IFRS and supplementary information to support internal and external reporting. Liaising with business units and Stakeholders. Understanding and explaining the internal and external business unit and consolidated Group information, both financial and non-financial.  Identifying opportunities to improve business processes.

Assisting Director of Finance, GFC, Group IFRS Manager, Business Units, Group Planning and Analysis, Corporate Reporting and Technical Accounting.

Candidates will be ACA / ACCA / CIMA qualified with Life Insurance experience.

London Market Insurer requires qualified Accountant experienced in insurance accounting to become a Member of the IFRS reporting team assisting the Group IFRS Reporting Manager.

Consolidation and reporting of IFRS and supplementary information to support internal and external reporting. Liaising with business units and Stakeholders. Understanding and explaining the internal and external business unit and consolidated Group information, both financial and non-financial.  Identifying opportunities to improve business processes.

Assisting Director of Finance, GFC, Group IFRS Manager, Business Units, Group Planning and Analysis, Corporate Reporting and Technical Accounting.

Candidates will be ACA / ACCA / CIMA qualified with Life Insurance experience.

This role has now been filled. For information regarding similar roles we are currently working on, please speak with one of our Consultants.

UK’s leading Life & Pensions Company is seeking to expand their successful internal audit department. Due to an internal transfer they are currently seeking a technical specialist to joining their audit department based in Scotland.

The skill set my clients seeks are:

• Professional qualification – ACA, ACCA, AIA or FIA
• Working with Actuaries or several years’ experience of working in an environment with knowledge of technical risk.
• Excellent analytical skills including analysing trends.
• Ability to build and maintain relationships.
• Excellent communication skills both written and verbal, including presentation skills.
• Strong influencing skills.
• No internal audit exp needed
• Must have the right to work in the UK as they will not be sponsoring Visa’s.

In return you will be working with a pioneering team, have great exposure to the business, excellent career development.

This role has now been filled. For information regarding similar roles we are currently working on, please speak with one of our Consultants.

The Head of Group Reporting is accountable for co-ordination and production of accurate consolidated accounting and financial reporting for Friends Provident Holdings under various reporting bases and maintaining and improving the Group financial reporting control environment. 

 This role is responsible for business review and analysis linking with Investor Relations and the Business Units to ensure the annual reports tell a coherent story of the group’s performance to the market.

 The production of accurate and timely information is essential in order for management to manage the business and to meet regulatory obligations

This role has now been filled. For information regarding similar roles we are currently working on, please speak with one of our Consultants.

The BU Engagement Manager is responsible for supporting the accuracy and then the subsequent analysis and review of financial information submitted by the business units and interpreting the results and translating this information into clear commentary for senior management, financial statements and external reporting. This role will be part of a team of at least three Group Reporting Managers reporting to the Head of Group Reporting.

Responsibilities

• Be the key point of day-to day contact between the Group Finance team and business unit finance team(s), taking ownership of supporting the business unit Finance Directors and their teams in the day to day understanding of their financial results and the linkage to the group’s results.

• Proactively challenge business unit teams on their results and build a comprehensive understanding of the drivers, risk and issues in business performance. This will include taking ownership for the analysis and validation of submissions by the group’s companies, their financial data and information/commentary packs.

• Provide input to and support for the Group Planning Team on the monthly MI pack and planning processes.

• Take responsibility for proactively building effective partnership relationships with the business unit(s) finance teams so that the reporting processes are robust and consistently applied and deliver accurate financial results to group in accordance with the group reporting timetable.

• Where significant consolidation journals are required at group level in relation to the underlying business units, be responsible for ensuring the adjustments are complete and accurate and in accordance with the group policies.

• Draft and provide input to financial statement including drafting accounting notes, policies and disclosures on areas that are directly related to the business unit(s) that the Reporting Manager is responsible for, including confirming the accuracy of such disclosure with the business unit finance teams.

• Responsible for the provision of accounting and technical support for local finance teams to help in the analysis of data, in line with group quality standards and timelines. This will include the advice and support on accounting issues for key projects through the life cycle of the transactions, including significant acquisition accounting requirements.

• Work closely with the Resolution finance team to ensure that Resolution’s requirements of the Group Reporting Team are fully understood and are delivered by the team. This will include implementation of policies set out by the Resolution Board and delivery of requirements to timelines. Communicate proactively with the Resolution finance team.

• Responsible for ensuring that accounting and reporting standards and rules are correctly interpreted understood and consistently applied. To take ownership for the process for preparing technical accounting guidance for transactions that occur and impacting group finance.

• Provide commentary for external reporting purposes on the Group’s performance in line with regulatory and market needs. This will include drafting of financial statements as required.

• Keep up to date with external developments and own area of expertise through professional training and commercial courses so as to provide effective support and advice to Local Finance Team Management team.