Outsourcing

2.1 The PRA Rulebook defines ‘outsourcing’ as ‘an arrangement of any form between a firm and a service provider, whether a supervised entity or not, by which that service provider performs a process, a service or an activity, whether directly or by sub-outsourcing, which would otherwise be undertaken by the firm itself’. This definition derives from Article 2(3) of MODR (Commission Delegated Regulation on organisational requirements and operating conditions) and Article 13(28) of Solvency II. In line with the EBA Outsourcing GL, when considering whether an arrangement with a third party falls within the definition of outsourcing, firms should consider whether the third party will perform the relevant function or service (or part thereof) on a recurrent or an ongoing basis.

2.2 Existing requirements on outsourcing, including Articles 30-32 of MODR and Article 274 of the Solvency II Delegated Regulation, only apply to ‘outsourcing’ as defined in paragraph 2.1. They do not apply to other arrangements between firms and third parties which fall outside the definition of outsourcing. In line with the definition in the G7 Third Party Elements and EBA ICT GL, this SS defines a ‘third party’ as ‘an organisation that has entered into a business relationship or contract with a firm to provide a product or service’.

Expectations for non-outsourcing third party arrangements