(This note is not part of the Regulations)
These Regulations are made in exercise of the powers in section 8 of the European Union (Withdrawal) Act 2018 (c.16) to address failures of retained EU law to operate effectively and other deficiencies arising from the withdrawal of the United Kingdom from the European Union. In particular these Regulations address deficiencies in retained EU law which under section 8(3)(a) are of a similar kind to a deficiency which falls within paragraph (f) of section 8(2).
These Regulations amend the Solvency 2 Regulations 2015 (SI 2015/575) to give the Prudential Regulation Authority (“PRA”) the power to disapply requirements which it must, acting as group supervisor, otherwise comply with or impose on certain types of groups of insurance or reinsurance undertakings. In doing so the Regulations amend regulation 24 (supervision of risk concentration and intra-group transactions); regulation 25 (supervision of system of governance); and regulation 28 (duties of group supervisor) of the Solvency 2 Regulations 2015. The PRA may already disapply requirements in relation to group solvency (see regulation 15 (supervision of group supervision and frequency of calculation) of the Solvency 2 Regulations 2015). These Regulations also amend regulation 26 (rule for deciding the group supervisor) to ensure that the requirement in regulation 26(1) which requires the PRA to supervise a group does not prevent the disapplication of requirements by the PRA under regulation 15, 24, 25 and 28 of the Solvency 2 Regulations 2015.
The PRA may only disapply the requirements in circumstances where the PRA must rely on the supervision exercised by a supervisory authority in a third country determined as “equivalent” in accordance with regulation 35 of the Solvency 2 Regulations 2015 (non-UK solvency 2 parent undertakings: equivalence). This ensures that a determination can only be made where equivalent requirements are imposed by such a third country supervisor. In addition, the PRA must be satisfied that, if the requirements were not disapplied, compliance with them would be unduly burdensome; and that disapplying the requirements would not adversely affect the advancement of the PRA’s objectives as set out in the Financial Services and Markets Act 2000 (c.8). The PRA may revoke or vary a determination.