There has been plenty of controversy surrounding the EU’s impact on UK insurance laws in recent weeks. Last week we revealed that
uninsured drivers are to get compensation under a new EU rule; and now a report has outlined some even more significant consequences of the EU’s regulation.
Annuities have, reportedly, become more expensive as a result of Solvency II – and that means that people are needing to work longer before they are able to retire.
The statement was made as part of a hearing at the Treasury Select Committee on the impact of Solvency II as the industry looks to relax some areas of the regime post-Brexit. According to a
Financial Times report, it was explained to the committee that annuity prices moved from five- to 10% when Solvency II was introduced with Phil Smart, a partner at KPMG, reportedly telling the committee that the rules are “very much focused on the European market” and that they do not necessarily reflect the characteristics of the UK.
Further complaints pointed the finger at the UK’s Prudential Regulation Authority for its cautious approach to the regulation and interpretation of the rules. Speaking to the publication, Andrew Chamberlain, of the Institute of Actuaries, explained that some products were becoming unaffordable.
“The price the consumer is paying now for the level of protection of Solvency II, together with the PRA’s interpretation on top, is a very high price particularly in some business lines such as annuities,” he suggested.
However, while life insurance firms in particular would like to see alterations to Solvency II and its application in the UK, there are also concerns about changing the regime and whether it will be seen as an equivalent to EU rules. Without equivalence it may be more difficult for UK-based insurers to do business in the EU post-Brexit.
What do you make of the existing Solvency II rules? Are they fair and being handled correctly or is there room for improvement? Leave a comment below with your thoughts.
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