Investor Presentaiton
Slide 13: Public Disclosure ICP 20
We have consulted in the area of Public Disclosure. The changes will only be of concern to the
larger commercial firms and by that we mean a firm writing more than £5m of premium or
with more than £25m of technical provisions. Captives are exempt as are Reinsurers.
Slide 14: Stress Testing
Stress testing is already used to some extent in the OSCA. However, in future, specific stress
testing will be applied to life companies to calculate solvency requirements. In addition we
continue to apply across the board stress testing to key insurance firms - the last time in 2010
and again this year.
The deadline for responses was 31 October and results are in the process of being reviewed.
Slide 15: Impact of UK GAAP changes
UK GAAP is changing for accounting periods commencing 1 January 2015. For insurance
companies, additional disclosures are required under FRS 103 which will result in significant
resource requirements and additional costs. For captive insurance companies the additional
disclosures will not provide meaningful information that is not already available to key
stakeholders (that additional information can be requested by both the parent and Commission
if required).
If licensees are not intending to follow IFRS and wish to consider an alternative form of
accounts, by excluding the additional disclosures under FRS 103, amendments have just been
made to both Companies Law and the IBL by way of Regulations in order to address this.
It is possible for captives (and others such as PCCs) to request a derogation from the
Commission from these additional disclosure under the IBL, and to prepare an alternative form
of audited financial statements. Guidance is on the Commission's website which will assist in
identifying which insurance licensees can approach the Commission for such a derogation, if
this has not been done already. The Guidance also includes details of the steps to be taken by
licensees.
It is not intended that the derogation will weaken the audited financial statements.
Following the issue of the derogation, the Board of a licensee will need to agree to the waiver
of an audit under Companies Law: the waiver will need to be registered with the Registrar
before the end of the current accounting period.
In order to exclude the additional disclosures, licensees will need to be exempt from audit
under Companies Law, which requires the financial statements to be prepared on a true and fair
basis. The alternative form will be prepared on a properly prepared basis. In order to ensure
that the directors' responsibilities are not weakened (which will be excluded from Companies
Law via the audit exemption), the Commission requires these responsibilities to be brought
back in via a standard condition on the licensee's insurance licence. As part of the derogation,
the Commission will therefore require licensees to agree to a standard condition on the
licence. This is again explained further in the Guidance.
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