Bank of England plans to relax EU insurance red tape receive lukewarm reception

Oliver Gill
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The Bank of England is at loggerheads with the insurance sector over the required level of changes to capital (Source: Getty)

Bank of England plans to reduce EU regulatory reporting requirements on insurers were labelled as a "step in the right direction" by the sector's main trade body.

The Prudential Regulation Authority (PRA), which supervises banks and insurers, today issued a consultation paper setting out plans to lighten the load under the Solvency II rules.

The proposals would "reduce the reporting burden for smaller firms" the PRA said in its consultation.

But the plans received only a lukewarm response from the Association of British Insurers (ABI).

"Today’s move by the PRA proposing some reductions to this is another step in the right direction and will be particularly helpful to smaller firms in easing this disproportionate burden they are facing," said ABI head of prudential regulation Steven Findlay.

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The ABI said Solvency II regulations – which stipulate the amount of capital EU insurers must hold to protect against insolvency – have increased the reporting burden on UK insurers by between four and eight times.

In October, an influential parliamentary committee urged the Bank of England and insurers to find common ground to ensure the sector remains competitive post-Brexit. The Treasury Select Committee warned a PRA focus on capital levels could throttle competition.

But the PRA wants the EU to step in to make adjustments to the capital requirements instead of implementing sweeping unilateral changes.

Findlay said the ABI's proposals "are part of a broader set of reforms that the UK insurance industry has proposed and the Treasury Select Committee recently endorsed".

"There still remains plenty of opportunity for the PRA to go further to ensure our insurance industry is able to fulfil a vital role in helping Britain thrive post-Brexit," he added.

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