PRA's policy on liquidity reporting for large insurers

Transcript

Ric Lea: On the 30 September, the PRA released a policy statement setting out how liquidity reporting was going to work for large insurers, to help it better equip itself with important liquidity data for the insurance sector.

This reporting is targeted at insurers with more than £20 billion in assets. And who have either: more than £10 billion of derivatives or; more than £1 billion of lending or repo securities.

Third country branches, Lloyds managing agents and non-Solvency II firms are not in scope.

Some of this reporting is carried out at an entity level and some reporting requirements are specific to ring fenced funds and matching adjustment portfolios. But there are some funds which will be excluded, and the policy statement sets thresholds to determine what is and isn't in scope.

There are four templates that in scope firms will need to report on. There is a cashflow mismatch form for the solo entity and a separate submission for non-excluded ring-fenced funds and matching adjustment portfolios, and this will be a monthly requirement.

There is also a short form version of this cash flow mismatch template. Crucially, this will need to be submitted with just a one business-day remittance period and can be requested daily rather than monthly by the PRA in extreme market conditions. There's also an annual committed facilities form, and a liquidity market risk sensitivities form which is a quarterly template which only applies at the level of ringfenced funds and matching adjustment portfolios.

These reporting requirements come into force on the 30th of September 2026. There is no phasing in. The deadline is longer than was originally consulted on, and there are some simplifications which have come into the templates and their scope. But time is tight, especially given the one day turnaround time for the cash flow mismatch short form template.

So firms really need to be looking at the reporting thresholds set by the PRA to determine if they're going to be captured. And firms who are going to be captured need to re-evaluate whether they can gather the right data in the form required while maintaining the right level of data quality and governance standards. And technology development or vendor solutions will need to be put in place with enough time to be able to perform dry runs and also make use of the user acceptance testing window that the PRA will be setting up to help with readiness testing.