CPPGroup : Homecare Insurance Group SFCR 2022

Homecare (Holdings) Limited

Solvency and Financial Condition Report ("SFCR")

(for the financial year ended 31 December 2022)

1

Contents:

Executive Summary

Approval by the Board of Directors

A. Business & Performance

A.1 Business and external environment

A.2 Performance from underwriting activities

A.3 Performance from investment activities

A.4 Operating/other expenses

A.5 Overall Business Performance - Results and Dividends

A.6 Any other information or disclosures

B. Systems of Governance

B.1 General governance arrangements

B.2 Fit and proper requirements

B.3 Risk management system including the Own Risk Solvency Assessment (ORSA) B.4 Internal control

B.5 Internal audit function

B.6 Actuarial function

B.7 Outsourcing

1. Risk Management C.1 Underwriting risk C.2 Market risk
2. • 
     C.3 Credit risk
     C.4 Liquidity risk
     C.5 Operational Risk
     C.6 Other material risk including:
   • Risk mitigation practices and risk sensitivities C.7 Any other disclosures
3. Regulatory Balance Sheet

D.1 Assets

D.2 Technical Provisions

D.3 Other liabilities

D.4 Alternative Methods of Valuation

1. Capital Management E.1 Own funds
   E.2 Solvency capital requirement and minimum capital requirement E.3 Use of the duration-based equity risk sub-module
   E.4 Difference between the standard formula and any internal models used
   E.5 Non -compliance with the minimum capital requirement and significant non-compliance with the solvency capital requirement

Appendices

2

Executive Summary

The European Union 2009/138/EC Directive to harmonise prudential regulation for Insurance Companies and Insurance Groups was introduced and adopted in the UK. The regulations require Companies and/or Groups to publish specific information under the reporting regime via a specific report, the Solvency and Financial Condition Report ("SFCR"). This document is prepared and published by Homecare (Holdings) Limited to demonstrate the prudential position of the insurance group of entities referred to as the Homecare Insurance Group ("HIG" or "the Group" or "Companies").

The Homecare Insurance Group (HIG) consists of Homecare (Holdings) Limited ("HHL") and Homecare Insurance Limited ("HIL" or "the Company"), which is the entity in the insurance group which underwrites policies of insurance. The ultimate parent company is CPPGroup Plc.

Both HHL and HIL each have an independent Board of Directors that are separate from CPPGroup Plc and have responsibility for the governance and conduct of the Companies. HHL is a non-trading holding company and therefore most of the prudential risks are within HIL.

HIL applied to the Prudential Regulatory Authority (PRA) for a single SFCR waiver, and this was initially granted in 2017 and renewed on the 21st April 2022. Therefore this SFCR is completed on this basis, incorporating the required information and disclosure for both HIG and the HIL solo entity.

HIL underwrites general insurance, predominantly Identity Protection Product (IPP) and small legacy base of payment card protection policies based in Eire, which fully lapsed in February 2022. The Company has in the past has been subject to regulatory intervention and is still currently operating under a Voluntary Variation of Permissions (VVoP). In 2017 the VVoP restrictions relating to assets were relaxed after a request from HIL. HIL no longer intends to have any of its other regulatory permissions re-instated and will continue with its strategy of managed decline until the HIL Board decides to enter a solvent run-off.

As a result of the VVoP, the Company does not have current permissions to underwrite new retail insurance policies. HIL is therefore continuing to adopt a strategy of managed decline where it ensures that it continues to deliver valuable IPP insurance based policies to its policy holders by renewing existing polices.

The HIL Board and executive management's main focus has therefore been managing the decline of the policy base in line with the policy terms and conditions and ensuring that the features, benefits and servicing remain current and that the policies meet customer expectations

The number of policies and premium income will, as a result, continue to decline due to natural attrition. HIL monitors this closely to ensure the policy base is sustainable and that the level of premium income does not compromise the Company's solvency position. The Company maintains sufficient capital to cover all of its perceived liabilities and risks and maintains the necessary capital levels to ensure it meets its solvency requirements. At 31 December 2022, HHL consolidated and HIL solo had eligible own funds of £2.8m (2021: £13.7m) and £2.8m (2021: £15.4m) respectively to cover minimum capital requirements (MCR) of £2.3m (2021: £2.2m) and £2.3m (2021: £2.6m) respectively. This represents adequate headroom in both instances. These are reviewed on a quarterly basis

3

against internal targets that are assessed and set at least annually taking into consideration the appropriate risks facing the Company as the policy base declines.

During the year the MCR became the most relevant solvency measure rather than Solvency Capital Requirement (SCR) following a balance sheet simplification and capital distribution exercise undertaken in December 2022. The SCR for HHL and HIL solo as at 31 December 2022 were £0.6m (2021: £8.9m) and £0.6m (2021: £10.4m) respectively. This provides adequate headroom in both instances.

HIL's strategy is regularly reviewed by the HIL Board to ensure that it meets the requirements of all its stakeholders. A number of tools exist to calculate and evaluate capital levels, including stress and scenario testing to ensure that the capital levels remain sufficient and within the HIL board's capital targets/risk appetite that support the strategy at the required level of confidence.

As the risk-carrying entity within HIG, risk management is embedded within HIL. This includes considering regular full risk reviews based on HIL's strategy and the HIL Board assessing the risk appetite for the Company for all key risks, thus ensuring that the Company operates within them. This is reflected in all capital planning and the associated capital modelling. Supporting this is a proportionate governance structure and control environment, which includes effective Board oversight, internal CPP Group and external control function monitoring. Operational management, primarily provided by CPP Group outsourced arrangements, is under the direct oversight of the HIL Board. The HIL board ensures that service provision is always maintained and has regular review meetings, along with escalation contacts. Profit in the year contributed £62k (2021: £693k) to HIG own funds.

4

APPROVAL BY THE ADMINISTRATIVE, MANAGEMENT OR SUPERVISORY BODY (AMSB) OF THE SFCR AND REPORTING TEMPLATES

Approval by the Board of Directors of the Solvency and Financial Condition Report for the year ended 31 December 2022.

The Board certifies that:

1. The Solvency and Financial Condition Report ("SFCR") has been properly prepared in all material respects in accordance with the PRA rules and Solvency II Regulations; and
2. we are satisfied that:
3. 1. throughout the financial year in question, the insurer has complied in all material respects with the requirements of the PRA rules and Solvency II Regulations as applicable to the insurer; and
   2. it is reasonable to believe that, at the date of the publication of the SFCR, the insurer has continued to comply and will continue to comply in the future.

Signed on behalf of the Board of Directors

1. Bowling Director
   18th May 2023

5