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PRA issues consultation on a draft supervisory statement setting out deferred tax asset recognition under Solvency II

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18 Feb 2014

The Prudential Regulation Authority (PRA) has issued for consultation a draft supervisory statement setting out their expectations of insurance firms within the scope of Solvency II in relation to the recognition of deferred tax assets on the Solvency II balance sheet. The consultation ‘CP3/14 Solvency II: recognition of deferred tax’ is open for response until 19 March 2014.

Solvency II is the new solvency regime for all EU insurers and reinsurers, which also covers the insurance operation of bancassurers. Due to come into effect on 1 January 2016, Solvency II aims to implement solvency requirements that better reflect the risks that companies face.

The purpose of the draft supervisory statement is to highlight to firms the areas they need to pay particular attention to when considering whether they can recognise a deferred tax asset on their Solvency II balance sheet and to also clarify the PRA’s expectations in relation to evidence supporting the credibility of profit projections to support deferred tax asset recognition. 

The full consultation paper and draft supervisory statement can be accessed from the PRA website.

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