Update 25 October 2018 from the Bank.
The consultation period for PRA CP13/18 ‘Solvency II Equity Release Mortgages’ closed on 30 September 2018. The proposed implementation date for the proposals in the CP was Monday 31 December 2018. Based on feedback to the consultation, the PRA has decided that the implementation date will not be before 31 December 2019. The PRA is making this announcement now in order to clarify the position for insurers planning their year-end 2018 processes. The PRA is currently giving careful consideration to the consultation responses and the impact, if any, of the updated implementation date to the proposed phase-in period. The PRA will publish final policy and supervisory statements in due course.
This is hardly surprising.
[edit] Our own letter to the consultation team is here. It said (point 1).
It is a worry that the consultation as a whole has taken such a long time. The Dowd report ‘Asleep at the Wheel’ identified a number of letters going back to October 2014 and resulting in a stream of consultation papers, discussion papers and supervisory statements (see, e.g., CP 48/16, CP 23/17, CP 24/17, DP 1/16 and SS 3/17) expressing concerns on ERM valuation. Yet the valuation issue is a simple one: once the decrements have been quantified using standard longevity modelling, the ERM valuation model embeds a simple European put option. Clearly the deferment rate concept has caused an intellectual challenge for some, but it is a natural consequence of modern derivative pricing theory, which dates back more than 40 years. The PRA has apparently confirmed this assessment in judging that the valuation changes are not a consequence of Solvency II, but should have been applied all along. Yet during this extended consultation period the ERM market has grown significantly and the PRA has approved the raising of sub-debt and tier 3 debt, not to mention dividend payments, all based on valuation models it has known to be flawed. Investors could rightly complain that they have been misled.
Our emphasis. How long does it take to price a simple European put option?