UK Solvency II Own Funds - Technical Updates, Fixes & Reporting Alignment
CP4/26, published on 25 February 2026 and closing 24 April 2026, proposes targeted updates and corrections to the PRA's UK Solvency II own funds rules. The proposals address specific technical gaps and inconsistencies identified since the original post-Brexit restatement, improve the readability and internal coherence of own funds rules, and align reporting templates with the updated requirements. Changes apply for reporting reference dates from 31 December 2026.
Context:
Following the UK's departure from the EU and the domestic restatement of Solvency II under the PRA Rulebook, several technical gaps, ambiguities, and inconsistencies have emerged in the own funds framework. CP4/26 is primarily a 'fixes and updates' consultation; it does not propose substantive policy changes but addresses situations where the current rules produce unintended results, are unclear, or have become misaligned with PRA supervisory expectations following the post-Brexit regulatory restatement exercise.
The consultation focuses on own funds eligibility criteria, the treatment of equity-accounted restricted Tier 1 own funds items, and the quality of capital instruments. It also includes consequential amendments to several supervisory statements: SS2/15 (Solvency II: Own funds), SS3/15 (Solvency II: The quality of capital instruments), and SS22/15 (Solvency II: Applying EIOPA's set 1 Guidelines). Additionally, reporting templates IR.02 and IR.23.01-04 require amendment to reflect the updated rules.
The timing is significant: firms will need to implement the reporting changes as part of their year-end 2026 cycle. The PRA has designed the effective date accordingly; changes apply for reporting reference dates falling on or after 31 December 2026, giving firms approximately ten months after the consultation closes to prepare. For most insurers, this means integrating the CP4/26 changes into existing Solvency II reporting workstreams rather than triggering a standalone implementation project.
Rules and Guidelines:
Targeted amendments to the Own Funds Part of the PRA Rulebook to address technical gaps and inconsistencies in the current Solvency II own funds framework
Updates to the treatment of equity-accounted restricted Tier 1 own funds items, including clarification of own funds permissions for such instruments
Amendments to SS2/15 (Own funds), SS3/15 (Quality of capital instruments), and SS22/15 (EIOPA Guidelines application) to improve clarity and internal consistency
Reporting template amendments: IR.02 and IR.23.01, IR.23.02, IR.23.03, and IR.23.04 to be updated to reflect the revised rules
Effective date: changes apply for reporting reference dates on or after 31 December 2026, enabling firms to integrate into the year-end 2026 reporting cycle
SoP1/19 (interpretation of EU Guidelines post-Brexit) is updated to reflect the current PRA approach
Businesses Affected:
UK Solvency II insurers (life and general) and reinsurers are required to report own funds under the PRA's Solvency II framework
Insurance groups with equity-accounted subsidiaries that include restricted Tier 1 own funds items, the clarifications directly affect their own funds permission arrangements
Actuarial and finance teams responsible for Solvency II own funds calculation, reporting, and governance
Regulatory reporting teams at insurers who must update reporting system configurations to reflect the amended IR.02 and IR.23 templates by year-end 2026
Legal and compliance teams are reviewing the updated supervisory statements for changes to PRA expectations on own funds quality and eligibility
Next Steps:
Respond to CP4/26 by 24 April 2026. The PRA welcomes feedback on whether the proposed changes achieve their intended technical objectives and whether any further consequential changes are required
Actuarial and regulatory reporting teams should review the proposed amendments to SS2/15 and SS3/15 against their current own funds classification and eligibility assessments
Plan the year-end 2026 reporting cycle to incorporate the template amendments to IR.02 and IR.23. Regulatory reporting technology teams should begin scoping system changes now
If your firm holds equity-accounted restricted Tier 1 own funds items, engage with the PRA on the implications of the clarified treatment for your own funds permission
Legal teams should review the updated SoP1/19 to ensure the firm's approach to EIOPA Guidelines remains aligned with the PRA's post-Brexit interpretation
Boards and audit committees should be briefed on the changes and the year-end implementation timeline to ensure appropriate sign-off on updated own funds disclosures
Source | Prudential Regulation Authority, UK Solvency Updates
