The TPS is prepared on an annual basis, and this year the focus has unsurprisingly been on the impact of Solvency II. The impact of tax is a key consideration when implementing Solvency II processes and developing the methodology for calculating the available and required capital. However, tax is an area where there has, so far, not been the focus that it deserves – particularly in view of the significant impact upon capital requirements that deferred tax assets can have.
There have been a wide variety of practices in the approach taken by insurers to calculating tax for Pillar 1 – there is not yet a clear consensus on what will be the industry norm and this needs to be agreed as a priority.
Tax has to date been underrepresented in Solvency II implementation at both the firm and the regulatory levels, and this is something that requires addressing urgently.