In line with Supervisory Statement 6/16 (SS6/16) ‘Maintenance of the ‘transitional measure on technical provisions’ under Solvency II’, the PRA has been monitoring market conditions since the previous biennial TMTP recalculation in December 2019. The PRA also considers whether changes in market conditions since then can reasonably be considered to have been sustained. In the PRA’s view, recent movements in risk free rates (RFR) meet the threshold for a material change in risk profile as set out in SS6/16.
The PRA would be willing to accept applications from firms to recalculate TMTP as at Wednesday 30 June 2021. In any application, the PRA expects firms to be able to demonstrate that a material change in risk profile has occurred. In the period up to Saturday 31 July 2021, the PRA considers that it would be reasonable for a firm to take a forward-looking view that encompasses how the risk profile is expected to evolve as a result of the GBP RFR transition to SONIA.
Firms should note that in order to expedite the application process, the PRA would expect applications at this time to use firms’ existing TMTP calculation methodology. Furthermore, applications received at this time would be in addition to the expected biennial TMTP recalculation at Friday 31 December 2021.
If you have any questions, please get in touch with your usual supervision contact in the first instance.