PRA publishes PS8/24 on third-country insurance branch supervision

• Updated SS44/15 expectations: Supervisory Statement 44/15 has been updated to include detailed information on the PRA’s expectations of third-country branches across several topics, with the revised version effective from 31 December.

• Case-by-case reinsurance review: The PRA clarifies that its case-by-case assessment of outwards reinsurance arrangements for third-country branches and their undertakings will explicitly include the views of the relevant home supervisor, as reflected in amended paragraph 2.23 of the new statement of policy.

• Use of CP21/23 approach in TPR: The PRA states it has already used the approach set out in CP21/23 to assess the reinsurance arrangements of all third-country branches that applied for authorisation under the Temporary Permissions Regime, and in its ongoing supervision of all such branches.

• Proportionate size assessment: The PRA confirms it will take a proportionate, case-by-case approach to assessing the relative size of each third-country branch, considering branch-specific factors including the branch’s potential impact category when determining supervisory expectations.

• FSCS exposure threshold for SMFs: The updated SS44/15 states that the PRA expects third-country branches to have under £500m of Financial Services Compensation Scheme liabilities for no Senior Management Functions to be required for the branch.

• Minimum key functions at branch level: Third-country branch undertakings must establish four minimum key functions

– risk management, compliance, internal audit and actuarial

– in respect of the branch’s operations, aligning branch governance with core Solvency II functional requirements.

• Broadly equivalent jurisdictions only: The PRA will only authorise third-country branches where the home jurisdiction is assessed as “broadly equivalent”, a concept the PRA has confirmed is distinct from Solvency II equivalence.

• Feedback on consultation responses: PS8/24 also provides the PRA’s feedback on industry responses to CP21/23 and sets out the final policy applicable to third-country insurance branches following that consultation.

The PRA said the implementation date for PS8/24 is 23 May 2024, with the future version of SS44/15 coming into force on 31 December.