PRA statement on the recalculation of the Transitional Measure on Technical Provisions (TMTP)

The Bank of England’s Prudential Regulation Authority (PRA) has published a statement addressed at insurance and reinsurance undertakings as regards the recalculation of the transitional measure on technical provisions (TMTP) which permits firms to recalculate and adjust their technical provisions on Solvency I Pillar 2 liabilities following the implementation of Solvency II over a period of time so as to reduce the overall impact of Solvency II requirements in any one year.
Although generally permitted only every other year and in line with the PRA’s Supervisory Statement on the „Maintenance of the ‘transitional measure on technical provisions’ under Solvency II“ (SS6/16), the PRA states that the recent changes in the risk-free rate may have also changed the risk profile of firms. As a consequence, the PRA now permits applications for recalculating the TMTP as of June 30, 2023. Firms shall thereby be able to verify the change in their risk profiles and shall – for purposes of an expedited application process – use their existing TMTP calculation methodologies.