- Solvency II consultation published today (28th April) as
government powers on with post-Brexit reforms
- Proposals will unlock tens of billions of pounds of
investment in UK infrastructure and green projects
- Move is part of government push to go further and faster to
capitalise on the UK’s Brexit freedoms and level up the country
The consultation on reforms to the Solvency II regime capitalises
on the UK’s post-Brexit freedoms to spur a vibrant, innovative
and internationally competitive insurance industry.
It cuts EU red tape and unlocks investment, helping to create
jobs while also maintaining a high level of protection for policy
holders. The reforms will also help to increase access to market
for new insurers and offer greater consumer choice.
The move is part of government commitment to go further and
faster to capitalise on the benefits of Brexit.
Economic Secretary to the Treasury, said:
Today’s consultation demonstrates our commitment to go further
and faster to deliver the benefits of Brexit.
Our reforms will unlock tens of billions of pounds of investment
in the UK economy, spur innovation in the market while protecting
policy holders - and will cement the UK’s position as a global
hub for financial services.
The Economic Secretary announced the government’s intention to
reform Solvency II legislation in a speech to the Association of
British Insurers in February 2022, with a commitment to consult
in April. The consultation sets out detail on the reforms,
including:
-
A substantial reduction in the risk margin for long-term life
insurers, including a cut of around 60-70%, and consulting on
the appropriate level for general insurers. This step will
release capital on insurers balance sheet.
-
A more sensitive treatment of credit risk in the matching
adjustment. The matching adjustment provides incentives for
insurers to issue long-term life insurance products by
‘matching’ them against assets with similar characteristics,
helping to increase the availability of this type of product
on the UK market.
-
A significant increase in flexibility to allow insurers to
invest in long-term assets such as infrastructure.
-
A meaningful reduction in the current reporting and
administrative burden on firms, removing EU bureaucracy
including by doubling the thresholds for the size of insurers
before the Solvency II regime applies.
-
Deliver further reforms to EU derived legislation, which will
increase access to the market for new insurers and offer
greater consumer choice. For instance, the government will
introduce a new mobilisation regime to encourage new insurers
into the market to boost competition, drive growth and create
jobs.
The proposals outlined today form part of wider changes proposed
by HM Treasury to the UK’s financial services regulatory
framework, so that we maintain a coherent, agile, and
internationally respected approach to financial services
regulation that is right for the UK.
They are just one of the ways the government is capitalising on
its post-Brexit freedoms, ensuring our regulations are tailored
to the needs of the UK economy, rather than the needs of 28
countries across the EU.
The consultation will run for 12 weeks closing on 21 July. The
government will then consider and publish a response to the
consultation in due course. The PRA will also publish a
consultation of their own at a later date.
Further information
- Solvency II sets out the prudential regulatory requirements
for insurance firms within the EU. This includes financial
resources, governance and accountability, risk assessment and
management, supervision, reporting and public disclosure. It was
introduced to harmonise EU-wide insurance regulation and came
into force in 2016.
- A detailed technical consultation will be published by the
PRA later in the year.
- The government recently published a policy document setting
out how the UK is capitalising on the benefits of Brexit and how
the government will use its new freedoms to transform the UK into
the best regulated economy in the world: The benefits of Brexit -
GOV.UK
- The Prudential Regulation Authority will also publish papers
on the same day, including a statement and supporting documents.
- Read our consultation here: Solvency II Review:
Consultation - GOV.UK
