Smaller insurance firms currently classified as public interest entities (PIEs) should anticipate retaining this status through 2025 and beyond, despite recent reforms under Solvency UK.
PIE status, typically assigned to businesses of significant public concern due to their size, employee count, or operational scope, has traditionally been determined by a combination of European directives, including Solvency II.
Although these European directives have been replaced in the UK following Brexit, the criteria for PIE designation have expanded to include private companies, AIM-listed firms, and third-sector organisations with more than 750 employees and an annual turnover exceeding £750 million.
The revised thresholds under Solvency UK (as recently outlined by the Prudential Regulation Authority), however, are distinct from those under Solvency II, leading to a divergence between PIE status and Solvency II designation.
Consequently, insurers that are currently recognised as PIEs should not expect any changes to their classification in the near future unless they fall below the thresholds set by Solvency II or until the PIE criteria are decoupled from Solvency II.
“This is disappointing since smaller insurers are unlikely to incur the additional costs of a one-off move to the non-Directive regime if they are unable to offset these against a reduction in ongoing professional fees,” commented John Burgum, actuarial director at Broadstone.
“We, therefore, don’t expect many to take advantage of the new thresholds when they are implemented at the end of the year and will choose to ‘opt’ to remain within the Solvency II regime.”
The Association of Financial Mutuals (AFM) has also highlighted the issue in recent communications with its member firms, warning that the increased premium and technical provision thresholds necessitate a voluntary requirement application for those wishing to continue under the current regime instead of transitioning to NDF (Non-Directive Firm) sector rules.
“We intend to push, alongside the AFM, for regulatory bodies to take action to alter the position,” Burgum added. “The primary focus will be on the Department for Business and Trade which has the capacity to create exemptions to PIE status, and who previously indicated they were minded to consider this further.”
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