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IMF Country Report No. 22/109

UNITED KINGDOM

FINANCIAL SECTOR ASSESSMENT PROGRAM

DETAILED ASSESSMENT OF OBSERVANCE OF INSURANCE CORE PRINCIPLES ISSUED BY THE INTERNATIONAL ASSOCIATION OF INSURANCE SUPERVISORS

April 2022

This Financial Sector Assessment Program paper on United Kingdom was prepared by a staff team of the International Monetary Fund. It is based on the information available at the time it was completed on March 18, 2022.

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Title page

UNITED KINGDOM

DETAILED ASSESSMENT OF OBSERVANCE OF INSURANCE CORE PRINCIPLES ISSUED BY THE INTERNATIONAL ASSOCIATION OF INSURANCE SUPERVISORS

March 18, 2022

Prepared By

Monetary and Capital Markets Department

This Detailed Assessment Report (DAR) was prepared by IMF staff in the context of an IMF Financial Sector Assessment Program (FSAP) in the United Kingdom. The FSAP was led by Mr. Udaibir Das. The DAR contains technical details and recommendations underpinning the assessment of UK’s observance of the ICPs. Further information on the FSAP can be found at http://0-www-imf-org.library.svsu.edu/external/np/fsap/fssa.aspx

Contents

  • Glossary

  • EXECUTIVE SUMMARY

  • ASSESSMENT OF INSURANCE CORE PRINCIPLES

    • A. Introduction and Scope

    • B. Information and Methodology Used for Assessment

    • C. Overview—Institutional and Macroprudential Setting

    • D. Preconditions for Effective Insurance Supervision

    • E. Recommendations

    • F. Authorities’ Responses to the Assessment

  • DETAILED ASSESSMENT

    • A. Detailed Assessment of Observance of the ICPs

  • BOXES

    • 1. Solvency II Review

    • 2. Supervision and Regulation of Climate Risk

    • 3. Society of Lloyd’s – Overview and Solvency Requirements

    • 4. Impact of COVID-19 and Supervisory Response

  • FIGURES

    • 1. Regulatory Oversight Structure

    • 2. Size and Structure of the Insurance Sector

    • 3. Insurance Liabilities

    • 4. Insurance Asset Allocation

    • 5. Insurance Profitability

    • 6. Insurance Solvency Coverage

    • 7. Calculation of the Solvency Capital Requirement

  • TABLES

    • 1. Insurance Penetration and Density

    • 2. Premium Income

    • 3. Summary of Observance with the ICPs

    • 4. Summary of Observance Level

    • 5. Recommendations to Improve Observance of the ICPs

Glossary

ALM

Asset-Liability Management

AML-CFT

Anti-Money-Laundering/Countering Terrorist Financing

APM

Alternative Performance Measures

BI

Business Interruption

BoE

Bank of England

CDR

Commission Delegated Regulation (EU) 2015/35

CEO

Chief Executive Officer

COBS

Conduct of Business Sourcebook

ComFrame

Common Framework for the Supervision of Internationally Active Insurance Groups

CRO

Contractual Run-Off Regime

DEPP

Decision Procedure and Penalties Manual

EEA

European Economic Area

EIOPA

European Insurance and Occupational Pensions Authority

ESMA

European Securities and Markets Authority

EU

European Union

FATF

Financial Action Task Force

FCA

Financial Conduct Authority

FICOD

Financial Conglomerates Directive (2002/87/EC)

FPC

Financial Policy Committee

FRC

Financial Reporting Council

FRF

Future Regulatory Framework Review

FSAP

Financial Sector Assessment Program

FSCS

Financial Services Compensation Scheme

FSMA

Financial Services and Markets Act 2000

GAAP

Generally Accepted Accounting Principles

GDP

Gross Domestic Product

HMT

Her Majesty’s Treasury

IAIG

Internationally Active Insurance Group

IAIS

International Association of Insurance Supervisors

ICOBS

Insurance Conduct of Business Sourcebook

ICP

Insurance Core Principle

ICS

Insurance Capital Standards

IFRS

International Financial Reporting Standard

ISPV

Insurance Special Purpose Vehicle

IMF

International Monetary Fund

IOSCO

International Organization of Securities Commissions

JMSLG

Joint Money Laundering Steering Group

LIBOR

London Interbank Offering Rate

LTG

Long-Term Guarantee

MA

Matching Adjustment

MCR

Minimum Capital Requirement

ML/TF

Money-Laundering/Terrorist Financing

MMoU

Multilateral Memorandum of Understanding

MoU

Memorandum of Understanding

MPC

Monetary Policy Committee

NECC

National Economic Crime Centre

NRA

National Risk Assessment

ORSA

Own Risk and Solvency Assessment

OSP

Outsourced Service Provider

PIF

Proactive Intervention Framework

PRA

Prudential Regulation Authority

PRC

Prudential Regulation Committee

PSM

Periodic Summary Meeting

QIS

Quantitative Impact Study

RMP

Risk Mitigation Programme

SCO

Secondary Objective

SCR

Solvency Capital Requirement

SFCR

Solvency and Financial Condition Report

SM&CR

Senior Managers and Certification Regime

SMF

Senior Management Function

SONIA

Sterling Overnight Index Average

SPV

Special Purpose Vehicle

SRO

Supervised Run-Off Regime

SS

Supervisory Statement

SYSC

Systems and Controls Sourcebook

TMTP

Transitional on Technical Provisions

TPR

Temporary Permissions Regime

UBD

Unauthorised Business Department

United Kingdom: Financial Sector Assessment Program-Detailed Assessment of Observance of Insurance Core Principles Issued by the International Association of Insurance Supervisors
Author: International Monetary Fund. Monetary and Capital Markets Department