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Transitional Measures for TPs

This working party will examine the management of Transitional Measures for TPs, a measure, one approved by PRA under Solvency II but whose subsequent management is not laid down in all areas. The sums involved are very material but the future management and fluctuation in the measure is unclear.

Key Objectives:

  • Under a change in economic conditions should the TMTP be capable of being increased compared to its 1/1/16 amount (under application to the PRA)
  • If the TMTP cannot increase then the TMTP may only respond to interest rate rises (in the sense of a reduction in TMTP) but not falls in interest rates. So is interest rate change a “change in risk profile” that requires TMTP review
  • Under a change in economic conditions, or change in risk exposures, how best should the revisiting of the TMTP be undertaken given the Solvency I capability may not be preserved, and the ICA methodology may have altered
  • What limits would be reasonable to be able to assert a TMTP does not need amendment even though there has been a change in conditions or exposures
  • In particular how to address a) changes in risk profile from business lines not forming the driver for the TMTP or b) internal shifts of business from TMTP driving lines of business to “non driver” lines, such as a GAR moving outside a with-profits fund and reducing the headroom for the TMTP within the with-profits fund
  • How should restructuring within a group impact the TMTP, being this Part VII transfers, reassurance, SPV, or movement of ownership of group companies within the group

Key Outputs:

The TMTP working party published their paper on the recalculation of the TMTP in August 2017, and presented the key findings of this paper at both the Chief Actuary and Senior Life Actuaries workshop in October 2017 and the Edinburgh sessional in November 2017.  This paper is the main output of the working party, with positive feedback received to date.  During 2018 the working party has been working with the PRA and the ABI TMTP working group on a PRA’s TMTP simplification project, and we await the PRA’s response to our initial feedback.

Chair: Jamie Cooke 
Membership: 8
Established: 2016

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