The UK has revealed its plans to overhaul Solvency II rules to reduce the burden on insurance companies post-Brexit.
Introduced in 2016, the European Union’s (EU) Solvency II regime sets rules related to governance practices and how much capital insurers must hold to offset the risk of their investments.
With the regulations not applicable to the UK anymore following Brexit, the UK Treasury shared that its proposed post-Brexit reforms for insurers include giving them more flexibility to invest in long-term assets, such as infrastructure, and a “meaningful reduction in the current reporting and administrative burden,” according to Bloomberg.
“EU regulation doesn’t work for us anymore, and the government is determined to fix that,” Treasury minister John Glen said at the annual dinner of the Association of British Insurers. “We have a genuine opportunity to maintain and grow an innovative and vibrant insurance sector.”
Glen said the UK proposed a significant reduction in the risk margin, the extra layer of capital required to be held for some types of business, including a cut of between 60% and 70% for long-term life insurers. It also proposed a “more sensitive treatment of credit risk in the marching adjustment.”
Meanwhile, in a recent statement at TheCityUK Annual Dinner, Bank of England (BoE) governor Andrew Bailey emphasised the importance of financial system resilience and ensuring regulations align with specific goals in the UK following Brexit.
The UK government will start accepting industry feedback on the proposed reforms in April 2022. Meanwhile, the BoE’s Prudential Regulation Authority will publish a more detailed technical consultation later in the year.
