The PRA has issued its final supervisory statement(SS10/16) on the remuneration rules under Solvency II.
Because the Solvency II regime came into force on 1 January 2016, the PRA is clear that it expects firms to comply with the remuneration requirements in respect of the current financial year. What is required of firms to ensure compliance will vary according to their PRA categorisation and specific circumstances.
This guide addresses the rules in detail. Headline points include a requirement to implement a formal remuneration policy that is compliant with Solvency II. The policy must ensure that appropriate internal governance processes are in place and identify the senior staff and other risk takers who will constitute “Solvency II Staff”. The rules which are potentially most onerous are the “Pay Out Process Rules”, requiring the deferral of variable remuneration (at a minimum of 40% for larger and more complex firms) and the operation of “malus” provisions.