Prudential Regulation Authority Rulebook

7.1

The PRA expects the assessment of firms’ solvency over the business planning period to form part of the ORSA process and report. In addition to articulating current regulatory (solvency capital requirement (SCR) and minimum capital requirement (MCR)) and own view of capital, the report is expected to highlight why firms believe capital buffers to be appropriate, set a capital contingency plan in case it breaches the required capital level, and include an assessment of the impact of any stress testing. The PRA expects key aspects of the methodology used and any deviations from the standard formula or internal model calculations to be explained.

7.2

The report is expected to state clearly the quality of own funds and how this is likely to change over the business planning period. Dividend policy is a key point in this assessment.

7.3

The PRA expects group reports to explain the derivation of the group solvency position, and any diversification benefit. This will include the capital position of any key subsidiaries, as well as the management actions the entities and the group could take if needed, and an assessment of the availability and transferability (fungibility) of own funds.