Recent comments made by Sam Woods, CEO of the PRA, about the PRA's approach to supervision are worrying. A speech prepared for this year's Building Societies Annual Conference (but not actually delivered) is relevant to all authorised firms, not just building societies. Parts of the speech, which relate to Solvency II rules on contract boundaries, are specifically directed at insurers.
In summary:
- The PRA argues that is not enough for firms to meet the requirements of the regulatory regime; they must also comply with the "spirit" of the rules.
- The PRA will form its own judgement about what this means for firms, despite the UK's obligations under EU law.
- Mr Woods' failure to acknowledge EU constraints on the content of the applicable rules, and therefore the PRA's use of its supervisory powers, appears to confirm that the PRA is willing to "gold-plate" EU legislation despite saying on many occasions that it would not.
Our client briefing (please click here) considers the implications of Mr Woods' comments for insurers, including the PRA's apparent objection to the redesign of unit-linked products to reflect new contract boundary rules set by Solvency II. The speech was not delivered in May, because of election purdah, but was published by the PRA in July.
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