Treasury Committee publishes Report on EU insurance regulation

In response to the practical difficulties of the Directive, the Report recommends that the Prudential Regulation Authority (PRA) should have a pragmatic discussion with the insurance industry. This should focus on the scope for amendments and increased proportionality in the implementation of the Directive.

As well as the PRA’s primary objectives, it has a secondary objective, which is to ‘facilitate effective competition’. The Committee recommends that the Treasury should consider giving this objective equal primacy.

Commenting on the publication of the report, Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee, said:

“The UK insurance industry managed investments of over £1.9 trillion in 2016 and paid nearly £12 billion in taxes to the Government. We should not ignore the consequences of Brexit on this important UK industry, nor the way that it is regulated irrespective of Brexit.

“The implementation of Solvency II in the UK has come at a considerable cost. Industry and the PRA do not appear to be aligned on some key issues, including the impact on consumers. They should agree what is best for UK industry and consumers as a matter of urgency.

“They should develop a roadmap that provides a prudent regulatory structure without stifling competition and innovation.

“Such a roadmap should both inform the Brexit negotiations and reflect the opportunities afforded post Brexit to develop the international competitiveness of the UK insurance industry.”

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Notes to Editors

• The Treasury Committee’s report ‘The Solvency II Directive and its impact on the UK Insurance Industry’ is attached.

• The previous Treasury Committee launched its inquiry into Solvency II on 13 September 2016. The terms of reference for the inquiry are here. Evidence submitted to the Committee for this inquiry is here.  Commenting at the time, the previous Chair of the Treasury Committee, Rt Hon. Andrew Tyrie MP, said:

"Brexit provides an opportunity for the UK to assume greater control of insurance regulation.

“The Solvency II Directive came into force in January, only after a heap of concerns had been expressed about it. Among its manifest shortcomings was the failure to secure value for money over its implementation.

“The Treasury Committee will now take a look at the Brexit inheritance on insurance to see what improvements can be made in the interests of the consumer."

• The Committee recommends that the UK’s implementation of the Solvency II Directive should:

• The PRA published the first in a series of consultation papers on Solvency II on 25 October 2017. The Committee will follow the progress of these papers.