Prudential Regulation Authority Rulebook

7.1

Firms are likely to have a number of potential parties to whom they might owe obligations to communicate or disclose information following a MTE, such as investors, other market participants, policyholders, staff and regulators. Firms are responsible for determining the obligations they have in these areas and for making the appropriate disclosures. When planning for such an event, the PRA expects firms to have considered what notifications or applications they might need or wish to make to the PRA, Lloyd’s or other authorities in such circumstances, and to consider what planning they might undertake ahead of a MTE to ensure they could make these notifications or applications in a timely manner.

7.2

Beyond firms’ general obligation to keep the PRA informed of any significant impacts of a MTE on their financial position, operational capabilities, or business plans, some firms might wish (or need) to approach the PRA following a MTE to make some specific regulatory notifications or applications.

7.3

The PRA expects firms to consider (in advance, and at the time of a MTE) whether any aspects of their proposed response to a MTE might require prior approval from the PRA or other bodies, or whether there are matters which might require prior notification to the PRA, based on requirements within the PRA Rulebook. Some examples might include (but are not limited to):

• notification of an intention to issue new ‘own funds’ items, as specified in the Own Funds Part of the PRA Rulebook;
• applications for PRA approval to include items within a firm’s own funds, such as ‘ancillary own funds’;
• notification of changes to internal models where these models are approved by the PRA for the calculation of firms’ regulatory capital requirements;
• notification of significant changes to reinsurance arrangements;
• applications for Part 4A permission for new insurance entities; and
• other matters required to be notified to the PRA (for example, requirements within the Notifications Part of the PRA Rulebook).

7.4

The PRA encourages firms to consider in advance what approvals they might wish to seek from the PRA in advance of a MTE, and to discuss their proposed approach and likely plans with the PRA. A firm should factor in the need for approval of any such applications into its planning for dealing with MTEs.

7.5

The PRA requires Lloyd’s to comply with the applicable notification requirements of the PRA Rulebook.^[9]  If an individual Lloyd’s managing agent believes the impact of the MTE has been sufficiently large to affect its ability to discharge its own regulatory responsibilities, the PRA expects the managing agent to discuss this with the PRA as well as discussing the situation with Lloyd’s. More generally, the PRA expects Lloyd’s to gather what information it believes necessary from managing agents to allow it to assess the impact of the event on the Lloyd’s market as a whole, and to share this information promptly with the PRA. The PRA will seek to avoid unnecessary duplication of requests to managing agents in line with its general co-ordination agreement with Lloyd’s, but the PRA reserves the right to request information directly from managing agents if it judges this to be necessary.