The Insurance and Reinsurance Undertakings (Prudential Requirements) (Transitional Provisions and Consequential Amendments) Regulations 2024

Transitional provision - approvals under regulation 42 of the Solvency 2 Regulations 2015

3.—(1) This regulation applies where immediately before 30th June 2024 an insurance or reinsurance undertaking has an approval pursuant to regulation 42 of the Solvency 2 Regulations 2015(1) to apply a matching adjustment to a risk-free interest rate term structure in order to calculate the best estimate of a portfolio of life insurance or reinsurance obligations.

(2) On 30th June 2024 the insurance or reinsurance undertaking’s regulation 42 approval becomes a permission granted by the PRA under section 138BA of FSMA 2000(2) to apply the PRA rules with the modifications set out in paragraph (4) such that the undertaking can continue to apply the matching adjustment to a relevant risk-free interest rate term structure in order to calculate the best estimate of a portfolio of life insurance or reinsurance obligations (a “matching adjustment permission”).

(3) A matching adjustment permission is to be treated as if—

(a) it were granted on the basis of the information supplied by the undertaking and referred to in the undertaking’s regulation 42 approval,

(b) an application had been made for it in accordance with and in compliance with the applicable requirements of section 138BA of FSMA 2000 and the Financial Services and Markets Act 2000 (Disapplication or Modification of Financial Regulator Rules in Individual Cases) Regulations 2024(3), and

(c) all the applicable requirements of regulation 4 of the Insurance and Reinsurance Undertakings (Prudential Requirements) Regulations 2023(4) (application of the matching adjustment) were complied with.

(4) The PRA rules listed in the first column of the table, the relevant text of which is set out in the second column of the table in the same row, are modified as set out in the third column of the table in the same row.

PRA rule	Relevant text of rule	Relevant text of rule as modified
Matching Adjustment rule 1.1	Unless otherwise stated, this Part applies to: (1) a UK Solvency II firm;	Unless otherwise stated, this Part applies to: (1) an insurance or reinsurance undertaking in accordance with the undertaking’s matching adjustment permission;
Matching Adjustment rule 2.1	A firm must not apply a matching adjustment to the relevant risk-free interest rate term structure to calculate the best estimate of its insurance or reinsurance obligations unless it has a matching adjustment permission	An insurance or reinsurance undertaking may only apply a matching adjustment to the relevant risk-free interest rate term structure to calculate the best estimate of its insurance or reinsurance obligations in accordance with, and only to the extent of, its matching adjustment permission.

(5) Nothing in this regulation prevents the PRA from varying or revoking a matching adjustment permission in accordance with section 138BA of FSMA 2000 and the Financial Services and Markets Act 2000 (Disapplication or Modification of Financial Regulator Rules in Individual Cases) Regulations 2024.

(1)

S.I. 2015/575. Regulation 42 was amended by S.I. 2019/407.

(2)

Section 138BA was inserted by section 34(1) and (2) of the Financial Services and Markets Act 2023.

(3)

S.I. 2024/539.

(4)

S.I. 2023/1347.