This supervisory statement (SS) sets out the PRA’s expectations in respect of insurers entering into or holding funded reinsurance arrangements as cedants.
It covers the PRA’s expectations in the following areas:
- the ongoing risk management of funded reinsurance arrangements;
- the modelling of the solvency capital requirement associated with funded reinsurance arrangements; and
- how firms should consider the structuring of funded reinsurance arrangements.
This SS is relevant to UK Solvency II firms and insurance and reinsurance undertakings that have a UK branch (third-country branch undertakings) when they hold, or are intending to enter, funded reinsurance arrangements.
This SS should be read in conjunction with Chapter 3 of the Conditions Governing Business, Chapters 6, 7 and 11 of the Technical Provisions, the Solvency Capital Requirement - General Provisions, and the Solvency Capital Requirement - Internal Models Parts of the PRA Rulebook. And Supervisory Statements: SS20/16 Solvency II: reinsurance counterparty credit risk, SS7/18 Solvency II: matching adjustment, SS8/18 Solvency II: internal models – modelling of the matching adjustment, SS1/20 Solvency II: prudent person principle.