The recent announcement from PRA leaves much discretion for supervisors and gives rise to a potential risk of different standards and requirements between similar firms, PwC says. Consistency in the application of ICAS+, it adds, is key.
Tim Edwards, director, PwC said: “ICAS+ avoids dual regulation allowing insurers to take advantage of their Solvency II work done to date. For insurers who are well advanced in their Solvency II preparations, ICAS+ allows them to push ahead with their plans. It is essential not to underestimate the challenge in reconciling ICAS to Solvency II.
“Many insurers will be disappointed by the lack of detail provided within ICAS+, but the FSA is caught between a rock and a hard place. The FSA could not have foreseen another round of ICAS capital calculations and therefore ICAS+ is a good compromise by accommodating insurers with well-developed Solvency II models, who would find it difficult or impractical to revert to historic models and, insurers with less well developed Solvency II models.”
PwC adds that it expects the FSA to follow closely EIOPA’s emerging guidance on Pillars 2 and 3 of Solvency II.
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