Prudential Regulation Authority (PRA) chief executive Sam Woods (pictured) addressed members of the Association of British Insurers (ABI) on Monday, ahead of today’s ABI Annual Conference, outlining what the industry should expect from the PRA as regulatory reforms take shape.
Woods – who lamented that the basic point of the reform package around competitiveness and growth “has got somewhat lost” in the back and forth over the risk margin and fundamental spread – highlighted that, following Brexit, the regulator is removing reporting requirements that are deemed unnecessary for the UK market.
The PRA also plans to implement a “significant streamlining of the rules” for internal model approvals; widen the range of assets that are eligible for the matching adjustment; raise the threshold at which firms are required to enter the Solvency UK regime; introduce a regime to lower barriers to entry for new insurers; make a series of other changes aimed at easing the flow of business; and continue to engage with market participants on improving access.
In his speech, Woods stated: “If Parliament agrees to progress the Solvency UK package the government puts to it, we will then be moving from the debating phase of regulatory reform into the implementation phase.”
In terms of timing, the CEO clarified that the changes wouldn’t be rolled out all in one go. “We would like to implement these reforms as swiftly as possible, but we can’t take inspiration from Fidel Castro and simply impose new rules by fiat,” he quipped.
Instead, the PRA is working closely with the Treasury to ensure consultation can be done as soon as possible on a set of rules that is consistent with the legislation.
“Inevitably the changes are more complex in some areas than in others,” declared Woods. “So rather than a ‘big bang’ implementation of the full reform package on a single date, we are looking hard at what we can do to ensure we deliver some reforms as quickly as possible, while also giving time for adequate consultation on others.
“Discussions with colleagues in the Treasury about precise timings are ongoing, but at this point our broad expectation is that we will publish a first consultation on some of the topics… in June, followed by a second consultation, on those areas that will benefit from more time for industry engagement to make sure we can get the details right, in September.”
He continued: “We are also mindful that for some changes, firms will need advance notice to prepare, but we expect that these consultations will give firms a good sense of how the detailed regime will operate. In particular, it means that firms will have a very good sense well before the end of 2023 of how we expect the new regime to operate, so that they can begin to adapt their investment plans as soon as they wish.”
Woods went on to note that if Parliament passes the Financial Service and Markets Bill, the regulator will be taking forward all of its planned actions under a new secondary objective to facilitate competitiveness and growth.
“We very much support the proposal in the Bill and look forward to the significant shift it will require of us – while maintaining safety and soundness and policyholder protection as our primary objectives,” said the chief executive.
The ABI Annual Dinner is held before the trade body’s whole-day conference in London.
