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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://www.imf.org/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 |