Feedback on the consultation’s responses


The PRA is required by the Financial Services and Markets Act 2000 (FSMA) to have regard to any representations made to the proposals in the consultation, and publish an account, in general terms, of those representations and its responses to them.


The PRA received 16 responses to the CP and addresses in this document the most significant issues raised by respondents. This statement also provides clarification of issues of uncertainty raised in response to the consultation.


Respondents queried the extent to which the PRA has powers to approach schemes in accordance with the consultation’s proposals. Although the PRA is not given a specific role or specified powers in relation to schemes either in the Companies Act 2006 or FSMA, it has a regulatory interest in ensuring that when promoting a scheme, insurance firms authorised by the PRA act in a manner which is consistent with the PRA’s statutory objectives of safety and soundness and policyholder protection. Accordingly the PRA must maintain appropriate arrangements to enable it to supervise PRA-authorised insurers proposing schemes. This supervisory statement provides some clarification of the approach that the PRA will adopt in carrying out this function.


The consultation’s responses included concerns that the approach consulted upon indicated that a hard and inflexible approach would be adopted by the PRA in all cases and that the PRA would prejudge all cases without first taking account of all relevant circumstances. This is not the PRA’s intention. The PRA recognises the importance of understanding and considering in each case where a scheme is proposed all facts and circumstances relevant to that scheme. This will include, for example, taking account of the diversity of insurers and the need to apply its approach to the particular business of the insurance firm or firms involved in a proposed scheme. The supervisory statement has been amended to express the PRA’s consideration of these concerns and to clarify the PRA’s intentions.


The PRA received feedback that it was not appropriate to emphasise, in relation to the insurance objective, the issue of continuity of cover. The PRA considers that the degree of emphasis on this element of the insurance objective is appropriate.


Some respondents questioned whether it was an appropriate use of the PRA’s resources to review its role in relation to schemes and to set out a different approach to that of the Financial Services Authority. The PRA is a new regulator with its own statutory remit and objectives.  It was especially important in this case for the PRA to review its approach on schemes given that it does not have a specified role under statute.


The PRA has considered the feedback that it clarify whether the approach applies to life business. The PRA’s insurance objectives apply equally to both general insurance and life business. Likewise schemes can be used to deal with both general insurance and life business or a combination of the two where the firm is a composite. For each type of firm the PRA seeks to ensure that policyholders are appropriately protected where firms propose mechanisms which may accelerate the return of capital to shareholders.


Some respondents were concerned that if a hard line is taken by the PRA on schemes this could have a negative impact on innovation and investment in the UK insurance sector. The PRA considered competition issues when developing the approach.


When formulating the approach and considering how best it should be implemented, regard was given to the need to minimise any adverse effect on competition, in line with the PRA’s duties prior to 1 March 2014, which applied when the consultation was published. We have considered this again in light of the PRA’s new secondary Competition Objective. Competition will be a relevant issue for consideration and will be considered in each case in accordance with the requirements of that secondary objective. Insofar as it is different, the extent to which consideration should be given to questions concerning innovation and investment in the UK insurance sector will be considered on a case-by-case basis in line with the PRA’s statutory objectives and in accordance with all legal obligations in force at the relevant time.