Commenting on the PRA’s proposed change of position on the use of dynamic volatility adjustment and the audit requirements for small firms, Steven Findlay, Assistant Director and Head of Prudential Regulation at the ABI said:
“It is encouraging to see these draft proposals from the PRA today. We have called for both the changes proposed, and will be responding to each consultation.
“The use of a dynamic volatility adjustment is permitted in many other parts of the EU, so this change in approach by the PRA will now put UK insurers on a more level playing field.
“The PRA’s external audit requirement led to a significant increase in the audit costs for smaller firms – more than 2.5 times higher than they had been before Solvency II. The removal of the requirement for these firms is both proportionate and pragmatic.”