Q&As

Prior to the implementation of Solvency II, where could I find the PRA's credit and market risk requirements that applied to insurers?

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Published on LexisPSL on 07/03/2016

The following Financial Services Q&A provides comprehensive and up to date legal information covering:

  • Prior to the implementation of Solvency II, where could I find the PRA's credit and market risk requirements that applied to insurers?
  • Which firms did SYSC 15 and 16 apply to?
  • What is meant by credit risk for insurers?
  • Credit risk policy
  • Counterparty assessment
  • Provisioning
  • Responsibility
  • What is meant by market risk for insurers?
  • Market risk policy
  • Valuation
  • More...

Prior to the implementation of Solvency II, where could I find the PRA's credit and market risk requirements that applied to insurers?

Prior to the implementation of Solvency II, the Prudential Regulation Authority's (PRA) rules and guidance were contained in:

  1. PRA SYSC 14 (Risk management and associated systems and controls for insurers) (this set out high level requirements for credit risk)

  2. PRA SYSC 15 (Credit risk management systems and controls for insurers), and

  3. PRA SYSC 16 (Market risk management systems and controls for insurers)

These chapters of the PRA Rulebook were deleted on 1 January 2016 (see: PRA Handbook (Solvency II Rulebook Consequentials) Instrument 2015), but you can view previous versions of the Rulebook on the PRA Rulebook website.

The PRA is responsible for regulating this element of an insurer's business activities, as a failure to manage credit and market risks can threaten the PRA's statutory objectives of promoting safety and soundness in financial markets. Specifically in relation to insurers, the PRA seeks to prevent the erosion of a firm's capital due to excessive credit losses which will threaten its stability as an ongoing concern, and to prevent firms from falling into a position where they cannot meet their own liabilities.

Firms also had to have regard to the requirements for stress testing under PRA GENPRU 1.2 (Adequacy and Financial Resources), INSPRU 6.1 concerning consolidated reporting, GENPRU

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