FIN.

PRA updates on “prudent person” principle

PRA has updated its policy documents following its consultation on the Prudent Person principle under Solvency 2.  PRA received only 7 responses to its consultation, but have made some clarificatory changes following its review of them.

The changes, now set out in SS1/20 take effect on publication on 27 May, and cover:

  • development and maintenance of an investment strategy;
  • management of risks arising from investments and internal governance within the investment function; and
  • investment in assets not admitted to trading on a regulated market and intragroup loans and participations.

PRA notes that compliance with the standards must be assessed from the perspective of the hypothetical prudent person in similar circumstances, and that it has to be considered on a case-by-case basis.  With that in mind, it sets out its guidance and lists the parts of the PRA Rulebook and other supervisory statements that will be relevant.

Emma Radmore