That points, I think, to keeping things as straightforward as possible, without glossing over uncertainties and risks. The two threads are intertwined. We have a better chance of keeping inflation expectations anchored to the target if the target is simple to communicate; and if we do not over elaborate, or slip in to being overly ambitious about, our conduct of cyclical policy. BIS Review 46/2006  11
Annuity writers should be cautious in changing their longevity assumptions. For example, the annual data can be volatile because of factors such as the failure of flu vaccines. Moreover, the slowdown in the rate of improvement in life expectancy appears less marked amongst wealthier people, who are represented disproportionately in annuity portfolios. Nonetheless, we have concluded that we should make some changes to our quantitative indicators in the light of recent longevity experience. These indicators are used by supervisors as one input into our review of whether insurers’ models meet Solvency II tests and standards. Third, we will soon complete the first full cycle of Solvency II reporting. Later this year, I plan to hold roundtables with insurers, investors and analysts to discuss Solvency and Financial Condition Reports (SFCRs). We are also reviewing whether an ongoing requirement for audit of every year’s SFCR is proportionate for the smallest insurers. It would be unhelpful for the PRA to be too prescriptive about the depth of content of SFCRs. But it strikes me that some areas could be made more consistent. For example, changes in Solvency Capital Requirement coverage could be broken down to show what is attributable to changes in capital, to changes in modelling and to changes in risk assumptions. Insurers need to explain fully to policyholders, investors and others what lies behind their Solvency II ratios. This is particularly true in more complex areas like internal models and the matching adjustment.