Guidance

SS8/14 – Subordinated guarantees and the quality of capital for insurers

Chapter

Introduction

Printed on: 08/09/2024

Rulebook at: 30/09/2019

1

Introduction

1.1

This supervisory statement applies firms and groups within the scope of the SII Directive.[1]

  • 1. Directive 2009/138/EC is more commonly known as the Solvency II Directive.
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1.2

The PRA intends to ensure a consistent and clear communication of its expectations to enable firms and the PRA to make judgements which advance the PRA’s objectives. 

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1.3

This statement sets out the PRA’s expectations of firms in relation to:

  • the use of subordinated guarantees in connection with capital instruments issued by a company, whereby the payment of coupons and repayment of principal are guaranteed by a firm (the guarantor);
  • how subordinated guarantees should not undermine the quality of capital held by firms to meet capital requirements (this expectation applies regardless of both the motivation for using a subordinated guarantee and the structure in which a guarantee is used); and
  • how the guarantor’s regulatory capital position should be reported if the liability created by the guarantee serves to undermine the guarantor’s quality of capital. 
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1.4

[Deleted] 

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1.5

[Deleted]

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Actions expected of firms [Deleted]

1.6

[Deleted] 

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1.7

[Deleted] 

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Other considerations of scope

1.8

This statement relates only to structures where guarantees are being used to facilitate obtaining finance. The statement is written without prejudice to any other rules of the PRA Rulebook. 

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1.9

For guarantees outside the scope of this statement and to which firms may be party, firms should still consider whether those guarantees serve to undermine the quality of their capital and discuss these with their usual supervisory contact as appropriate.

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