INSURANCE firms will not get regulatory approval unless they can prove they have rigorously estimated the risks they face across their business, Bank of England boss Mark Carney said yesterday.
The new Solvency II rules come into force next year, making insurers lay out more detailed risk and capital plans, across Europe.
“This rigour has a purpose. The dangers of using poorly designed models were made all too clear in the banking sector,” Carney told the Institute and Faculty of Actuaries General Insurance’s annual conference. “So the Bank won’t hesitate to withhold approval of inadequate or opaque models.”
Carney added that when interest rates rose, they would remain below pre-crash levels for years to come.
Minouche Shafik, the Bank’s deputy governor for markets and banking, said rates might have to rise more quickly if pay rises aren’t matched by higher productivity.