This supervisory statement is addressed to UK Solvency II firms and to Lloyd’s. The Prudential Regulation Authority (PRA) expects firms to read this statement alongside all relevant European legislation and the Solvency Capital Requirement Parts of the PRA Rulebook.1



This statement expands on the PRA’s general approach as set out in its insurance approach document.2 By setting out the PRA’s expectations of firms in relation to the treatment of sovereign debt in internal models, this supervisory statement promotes the safety and soundness of the firms it regulates and contributes to securing appropriate degree of protection for policyholders.



For the purpose of this statement, sovereign debt refers to exposures in the form of bonds and loans issued or guaranteed by counterparties including but not limited to:
(a) central banks;
(b) central governments; and
(c) supranational organisations.


The PRA has considered matters to which it is required to have regard, and considers that this statement is compatible with the Regulatory Principles and relevant provisions of the Legislative and Regulatory Reform Act 2006. This statement is not expected to have any direct or indirect discriminatory impact under existing UK law.