CP 1/21: Transition of UK Solvency II Discount Curve to SONIA

On 7 January 2021, the Prudential Regulation Authority (PRA) published Consultation Paper 1/21, setting out the plan for the transition of the UK Solvency II discount curve to a curve that references the Sterling Overnight Index Average (SONIA). This transition, which is proposed to happen on 31 July 2021 at the earliest, may create both operational and financial burdens to insurance companies. In this market update note, we summarised key proposals from the PRA as set out in the Consultation Paper and our take on these proposals.