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ARTICLE · 11 JUNE 2019

Insurance As Unfunded Credit Protection

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A year after the UK Prudential Regulation Authority (PRA) published its controversial Consultation Paper (CP) 6/18 "Credit risk mitigation:

United StatesInsurance
Angelia Chia
Angelia Chia
Ben Sandstad
Ben Sandstad
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A year after the UK Prudential Regulation Authority (PRA) published its controversial Consultation Paper (CP) 6/18 "Credit risk mitigation: Eligibility of guarantees as unfunded credit protection", the PRA has issued feedback and revised policy positions in a Policy Statement (PS 8/19) and an updated Supervisory Statement (17/13 "Credit Risk Mitigation") dealing with unfunded credit risk mitigation (CRM) for the purposes of calculating capital requirements under the Capital Requirements Regulation (575/2013) (CRR).

The new publications provide welcome policy revisions and the PRA has, notably, removed the proposed clarification to the meaning of "pay out in a timely manner", clarified its position on "legal effectiveness and enforceability" and introduced provisions around risks arising from eligible guarantee arrangements and recognising residual risks.

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