#Since the publication of the PRA’s policy statement PS2/24 Review of Solvency II: Adapting to the UK insurance market, which amongst other things set out the revised thresholds for being considered a Solvency II firm in the UK, there has been a lot of uncertainty about what this meant for a firms’ Public Interest Entity (PIE) status.
A PIE is a business that is of significant public focus because of the nature of the business, the size of its operations, or the number of employees currently on the books. The current PIE status is determined through a series of European directives and rules many of which have been repealed and replaced by other directives, but which ultimately lead to the Solvency II Directive.
The PIE threshold has recently been expanded to include private companies, AIM-listed companies, and third sector companies that have 750+ employees and £750m turnover.
However, the new minimum thresholds for Solvency UK are defined separately from the Solvency II Directive and as such will no longer be aligned with the PIE threshold. Therefore, any insurers currently treated as a PIE should assume they will continue to be treated as a PIE in 2025 and beyond.
That is until either such time that they fall below the thresholds set out in the Solvency II Directive or the point at which the PIE threshold in the UK ceases to be aligned with the Solvency II Directive.
John Burgum, Actuarial Director at Broadstone, commented: “This is disappointing since smaller insurers are unlikely to incur the additional costs of a one-off move to the non-Directive regime if they are unable to offset these against a reduction in ongoing professional fees.
“We therefore don’t expect many to take advantage of the new thresholds when they are implemented at the end of the year and will choose to ‘opt’ to remain within the Solvency II regime.”
The Association of Financial Mutuals (AFM) has recently written to member firms that are affected by this to highlight the implications. As published in the PRA’s policy statement PS2/24, the increase in premium and technical provision thresholds means that affected insurers will need to apply for a voluntary requirement (VREQ) if they wish to remain in the existing regime rather than operate under Non-Directive Firm (NDF) sector rules.
Some unanswered questions remain regarding the wider implications for smaller insurers remaining as a PIE. For example, those that ‘opt’ to remain within Solvency II when they could otherwise have fallen out, would they remain within Solvency II indefinitely or could they opt out again at a future date if the PIE threshold changes?
“We intend to push, alongside the AFM, for regulatory bodies to take action to alter the position,” said John Burgum. “The primary focus will be on the Department for Business and Trade which has the capacity to create exemptions to PIE status, and who previously indicated they were minded to consider this further.”
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