PRA scraps costly audit requirement following AFM lobbying

PRA scraps costly audit requirement following AFM lobbying

PRA scraps costly and unnecessary audit requirement following AFM lobbying

The Prudential Regulatory Authority has announced today (17 October 2018) that it will exempt small UK insurers from the requirement to have their annual Solvency and Financial Condition Report (SFCR) externally audited.

All AFM members meet the threshold condition for the exemption, as do around 120 other small insurance companies (see PS25/18 'Solvency 2: external audit of the public disclosure requirement').  We provided evidence to the PRA that this was a very costly exercise, and duplicated verification work elsewhere.  For mutuals and not-for-profits, the extra audit work added extra pressure to a tight reporting timescale, and has more than doubled many organisation's audit costs, without providing any clear benefit to readers of the SFCR.  

Martin Shaw, Chief Executive of AFM commented: "We are grateful to PRA for exempting our members from this requirement, which gold-plated the Solvency 2 rules, and has not been adopted by any other European country.  Members of a mutual already receive a copy of the report and accounts of their insurer, and this gives a strong account of how the business is run in their best interests.  The SFCR is a technical document which has added up to £50,000 to audit costs, and which our evidence demonstrated, is only read by industry professionals."