Life insurance newsletter: Issue 14 - FINRA - Rules and Regulations

new rules and will provide a useful early indication
of what the Level 2 implementing measures might
look like. This should be helpful for firms in their
preparations to be compliant in time for the new
rules. Further details on the consultation schedule
can be found on our website:
http://www.fsa.gov.uk/pubs/international/
solvency_papers.pdf.
Quantitative Impact Study 4 (QIS 4)
QIS 4, designed to inform the development of the
new European Standard Formula and the rules for
technical provisions, was conducted between April
and June 2008. There was good participation from
the UK industry in this exercise and it has provided
us with useful information on the possible impact of
the new standards. This insight is allowing us to
better reflect any UK-specific issues in the
discussions we have with our European colleagues in
CEIOPS. The UK country report, with details on the
key findings for those UK firms who participated,
was published in December 2008. The report can be
found on our own website at:
http://www.fsa.gov.uk/pubs/international/
QIS4_report.pdf. The EU-wide results were outlined
in a CEIOPS published in November 2008:
http://www.ceiops.eu/content/view/118/124/.
Discussion Paper (DP) 08/4: The Path to
Solvency II
To assist the UK industry in its preparations for the
implementation of Solvency II, we published DP08/4
in September 2008. The DP draws attention to some
of the major changes that Solvency II will bring to
existing UK regulatory requirements and practice,
and identifies areas in which firms might best focus
their preparations through the coming 12-18
months. We consider this publication essential
reading for most insurers and reinsurers. We
recommend that as a minimum, Chapter 2 is
presented to firms’ senior management and the
board, as it outlines their responsibilities and
indicates how they might delegate them.
The period for firms to respond to the DP closed on
31 December 2008. The level of responses was very
encouraging and we are grateful to all those that took
the time to provide us with detailed feedback. We plan
to publish our Feedback Statement in early May.
Solvency II Special Project Fees (SPFs)
In our Fees CP (CP09/7) published in February, we
set out proposals to charge an SPF to recover part of
our costs relating to Solvency II in the financial year
2009/10. In Chapter 10 of the CP we propose to
levy £4.2m to recover our Solvency II
implementation costs from the firms likely to be
affected by the Directive. This is in addition to the
SPF we consulted on in CP08/18 (Chapter 6) to
recover £3.2m in 2009/10 for work related to the
Internal Model Approval Process (IMAP). This
IMAP-SPF will be applied to larger insurers that are
likely to seek to use the internal model approach for
most or all of their business. The firms that we have
identified as within scope of the IMAP-SPF have
been written to on an individual basis. Overall we
are proposing to recover a total of £7.4m in 2009/10
for Solvency II-related implementation costs.
Euro-Sterling value for insurance
regulatory purposes
As we state on our website, the Sterling value of the
Euro for insurance regulatory purposes for the
12-month period beginning 31 December 2008 is
78.690 pence. You should use this value for
calculating capital resources requirements and it will
apply to the relevant regulatory returns that insurers
are required to deposit under FSA rules.
Rule 2.1.33R of the General Prudential Sourcebook
(GENPRU) and rule 1.1.50R of the Prudential
Sourcebook for Insurers (INSPRU) state that:
• For the purposes of the base capital resources
requirement, INSPRU 1.1.45R(1) and INSPRU
1.1.47R(1), the exchange rate from the Euro to
the pound sterling for each year beginning on 31
December is the rate applicable on the last day of
the preceding October for which the exchange
rates for the currencies of all the European
Union member dates were published in the
Official Journal of the European Union.
Rule 4.7(7) of IPRU (FSOC) states that:
• For the purposes of the rules in Chapter 4 and
the definition of non-directive friendly society,
the exchange rate from the Euro to the pound
sterling for each year beginning on 31 December
is the rate applicable on the last day of the
preceding October for which the exchange rates
for the currencies of all European Union member
states were published in the Official Journal of
the European Union.
This year’s value was set on 31 October 2008 and
published in the Official Journal on 1 November 2008.
Page ◆ 6
This is not FSA guidance.