PRA publishes supervisory statement setting out deferred tax asset recognition under Solvency II

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16 Apr, 2014

The Prudential Regulation Authority (PRA) has published a supervisory statement ‘SS2/14 Solvency II: recognition of deferred tax’ 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.

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 supervisory statement is to highlight to firms the areas (in respect of both the balance sheet recognition and the solvency capital requirement calculation) 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 supervisory statement can be accessed from the PRA website.

* Update 20 February 2015.  The PRA has updated SS2/14.  The updated version is available on the PRA website.  Update 2 December 2016 - the PRA has issued an updated SS2/14 which is available on the PRA website.*

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