Screengrab from the evidence session streamed by Parliamentlive.tv
Prudential Regulation Authority (PRA) chief executive Sam Woods (pictured) has defended the regulator’s projected timeline for the full implementation of the Solvency II reforms.
During Wednesday’s Treasury Committee hearing on financial services regulation consultations, it was highlighted that the reforms were announced in November 2022 and that the required legislation has since been enacted.
Woods was asked: “In your consultation, you state that the full scale of the implementation of the reforms that you’re consulting on won’t take effect until the fourth quarter of 2024. Can you understand why some people think that you are dragging your feet?”
In response, the PRA CEO described the projected timeline as a realistic one.
“I have frequently asked that question myself to the team – ‘Can we go faster?’ – because we want to get this done,” Woods said. “If you just look at the matching adjustment bit of it, there’s eight million annuity policies in this country, so it’s a huge industry. And then the work itself is quite detailed.
“You’ll have seen the consultation paper itself and all the annexes – there’s 180 pages just in the consultation paper... It is a very detailed process. And I have become convinced that we need to do this properly, and we are doing it at the maximum speed that is consistent with doing it properly.”
Quizzed about the two-year span from announcement to implementation, Woods replied: “I think it’s just realistic. There is a limit to the speed at which you can do these things. But the team is working incredibly hard.”
According to the chief executive, several constraints include the level of bandwidth within the PRA.
“This is very expert and detailed work, and it has to be done by the experts, and we can’t just double our size to do things like this,” he declared. “That is one constraint, but it may not be the most important one.”
Another limitation, according to Woods, is simply the need for time to work on something as complex as adapting the Solvency II framework to the UK insurance market.
He said: “The other constraint, of course, is that we need to do the thinking, then we need to consult with the industry. And in fact we’ve already reduced the consultation time. Some of the feedback has been, ‘Couldn’t you give us a bit longer?’ And firms also themselves need a bit of time to get ready for these changes because of the complexity of what we’re doing. So, it’s all of those things together, really.
“The government as well has been very keen on moving as fast as possible. And some of the changes are being brought forward quicker, particularly the risk margin cut, to the end of this year. And we’ve worked with the government to enable that. But for the whole package, it just can’t be done to a level of quality that you should expect for something this important at a speed faster than we’re going.”
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