External Audit

1.1

Unless otherwise stated, this Part applies:

1. (1) to a UK Solvency II firm;
2. (2) to the Society in accordance with General Application 3; and
3. (3) at the level of a group, to which Group Supervision 2.1(1) or 2.1(2) applies and where the PRA is the group supervisor, to a relevant insurance group undertaking; and
4. (4) to an external auditor of such a firm or group.

1.2

This Part applies to a firm or a relevant insurance group undertaking, as the case may be, in respect of financial years ending on or after 15 November 2016.

1.3

In this Part, the following definitions shall apply:

delegated act

means Commission Delegated Regulation (EU) 2015/35 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II)

group supervisor

means (in relation to a group) the authority designated as group supervisor in relation to that group, in accordance with Article 247 of the Solvency II Directive.

relevant elements of the SFCR

means the templates and information in 2.2

SFCR Implementing Technical Standard

means Commission Implementing Regulation (EU) No. of 2015/2452 laying down implementing technical standards with regard to the procedures, formats and templates of the solvency and financial condition report according to Directive 2009/138/EC of the European Parliament of the Council

2.1

A firm or a relevant insurance group undertaking must ensure that the external auditor provides a report which includes an opinion about the relevant elements of the SFCR in accordance with 4.

2.2

The relevant elements of the SFCR are:

1. (1) Subject to (3), (4) and 4.2, the information that a firm and a group discloses pursuant to Article 296, 297, and 359(d) and (e) of the delegated act;
2. (2) Subject to (3), (4) and 4.2 and where appropriate, the following templates that are provided in the SFCR Implementing Technical Standard;
1. (a) S.02.01.02
2. (b) S.12.01.02
3. (c) S.17.01.02
4. (d) S.22.01.21
5. (e) S.22.01.22
6. (f) S.23.01.01
7. (g) S.23.01.22
8. (h) S.25.01.21
9. (i) S.25.01.22
10. (j) S.28.01.01
11. (k) S.28.02.01
12. (l) S.32.01.22
3. (3) Where the information in 2.2(1) and 2.2(2) is, or derives from, the SCR that information shall only be subject to external audit for firms calculating their SCR using the standard formula.
4. (4) Where the information in 2.2(1) and 2.2(2) is, or derives from, the group SCR that information shall only be subject to external audit for relevant insurance group undertakings calculating their group SCR using the standard formula.

3.1

A firm or a relevant insurance group undertaking must:

1. (1) appoint an external auditor in accordance with Auditors 2, 3 and 4 to perform the functions in 2; and
2. (2) submit the report to the PRA and disclose it publicly with the firm’s SFCR.

4.1

Subject to 4.2, an external auditor appointed by a firm or relevant insurance group undertaking pursuant to 3 must:

1. (1) undertake a reasonable assurance engagement on relevant elements of the SFCR;
2. (2) produce a report that includes an opinion addressed to the governing body confirming that the relevant elements of the SFCR are prepared in all material respects in accordance with the PRA rules and Solvency II Regulations on which it is based;
3. (3) read and consider all information disclosed by the firm in its SFCR that is not a relevant element of the SFCR to identify material inconsistencies with the relevant elements of the SFCR and any knowledge obtained during the course of the audit of the SFCR engagement and (where applicable) audit of the financial statements.

4.2

Where the relevant elements of the SFCR in a group SFCR that:

1. (1) pertains to an undertaking that is not a Solvency II undertaking; and
2. (2) information has been prepared in accordance with:
1. (a) PRA rules other than those implementing the Solvency II Directive; or
2. (b) an EU instrument other than the Solvency II Regulations,

the external auditor shall state in the report under 4.1(2) that the information has been properly compiled in accordance with the relevant PRA rules and EU instruments relating to that undertaking from information provided by undertakings in the group and the relevant insurance group undertaking.

4.3

The Report in 4 must be prepared with due, skill, care and diligence.