ENSURING FIRMS CONTINUE TO MEET OUR STANDARDS
We will coordinate with the PRA to exchange information that is relevant to our individual objectives, but will act separately when engaging with firms – this reflects the independent but coordinated regulation as set out in the MoU.
We aim to ensure the right information is shared with the relevant body at the appropriate time, through a combination of a collaborative culture and staff who are familiar with the priorities of the other regulator; underpinned by clear processes. The international supervisory colleges mentioned above will be an important part of this.
The supervisors of each regulator will make their own, separate, regulatory judgements against their respective objectives. We will coordinate with the PRA to exchange information that is relevant to our individual objectives, but will act separately when engaging with firms – this reflects the independent but coordinated regulation as set out in the MoU.
With-profits
An example of an issue on which we will cooperate with the PRA is the supervision of insurers with with-profits business. The FCA and the PRA will co-ordinate their supervision of insurers under the framework set out in the FCA/PRA MoU. Special arrangements are needed for with-profits policies because the returns are not well defined, and are at the discretion of the insurance companies. A separate MoU will set out how the FCA and the PRA will work together in order appropriately to protect the interests of with-profits policyholders.
As part of its continuous assessment of the insurer’s financial resources, the PRA will seek to ensure that any discretionary benefit allocations or other changes with financial implications that the insurer has proposed are compatible with its continued safety and soundness. We will have responsibility for monitoring whether the proposed changes are consistent with the insurer’s previous communications to policyholders, our conduct rules and the insurer’s overriding obligation to treat customers fairly.
There may be circumstances where the proposed discretionary benefit allocations call into question the safety and soundness of the firm as a whole and so its ability to meet its obligations to policyholders generally. In such circumstances, the PRA will work with the insurer and us to explore alternative ways those allocations could be made without materially impairing the insurer’s safety and soundness. If no reasonable alternative exists, and given the risk to the insurer’s overall safety and soundness, the Bill gives the PRA the power to take action to prevent such allocations being made. Where the PRA is satisfied that the insurer’s decisions, or our requirements, do not affect the overall safety and soundness of the firm, the PRA will not take action.
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