07 April 2016

Bank of England: Solvency II - Remuneration requirements

This consultation paper seeks feedback on a draft supervisory statement which sets out the Prudential Regulation Authority’s expectations with regards to the Solvency II Regulation.

From 1 January 2016, the remuneration requirements in the Solvency II Regulation became directly applicable to Solvency II firms. National Competent Authorities are expected to ensure that Solvency II firms are compliant. The PRA intends to monitor compliance with the regulatory requirements in the same way that it does for PRA rules.

The supervisory statement clarifies PRA expectations of how Solvency II firms should comply with the key Solvency II remuneration requirements such as identification of Solvency II staff (Article 275(1)(d)), deferral (Article 275(2)(c)), and performance measurement (Article 275(2)(b), (d) and (e)). The purpose of this statement is to ensure that the regulatory requirements are interpreted correctly and applied consistently across Solvency II firms with different outcomes due only to differences in the ‘internal organisation of the insurance or reinsurance undertaking, and the nature, scale and complexity of the risks inherent in its business’ (see Article 275(3) of the Solvency II Regulation).

Please note, the expectations set out in the supervisory statement reflect the PRA’s expectations at the time of writing and may be subject to change. For example, the Bank of England and Financial Services Bill proposes to introduce provisions in the Financial Services and Markets Act 2000 (FSMA) that would extend the Senior Managers and Certification Regime to insurers. Assuming the Bill receives Royal Assent, the PRA will need to consult. This particular issue is not the subject of this consultation paper and will be covered in a separate consultation later this year.

The PRA has engaged with the Financial Conduct Authority (FCA) on this draft supervisory statement.

The PRA welcomes views on this consultation by Thursday 2 June 2016.

Full news

Consultation paper

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