Britain’s main financial watchdog has set out a raft of changes to the EU’s Solvency II regime to improve the competitiveness of the UK insurance market and unlock investment in the economy.
In an announcement this morning, the Prudential Regulation Authority (PRA) provided more detail on how it will make adapt the EU’s Solvency II rules into a new Solvency UK regime.
The PRA said it would move towards a more principles-based system for assessing firms’ internal models, taking away many of the more onerous requirements that insurers must meet.
Other proposals would allow more flexibility in the calculation of capital requirements increase the thresholds at which small insurers are required to enter the Solvency UK regime.
Costs would be reduced for insurers by “streamlining reporting requirements”.
To encourage more competition in the market, the PRA has proposed a ‘mobilisation’ regime which will allow “more flexibility” to newly authorised insurers. Branches of international firms operating in the UK will also have certain requirements removed.
Sam Woods, CEO of the PRA said: “These measures will reduce bureaucracy, facilitate competition, and support UK economic growth and competitiveness without lowering prudential standards or weakening policyholder protection.”
The regulator said the forms “form part of a wider package which will be implemented through a combination of government legislation and PRA rule changes.”
The reforms will be implemented in two stages, with some coming into force by the end of this year and others waiting until next year.
The UK government set out its plans for a post-Brexit overhaul of the EU’s Solvency II rules in November last year, with a view to unlocking billions in capital from insurance company balance sheets.
However, the PRA was involved in a public dispute about the exact direction of the reforms late last year, and warned that it would increase the risk of insurers collapsing.
Earlier this year, Woods has said that it was time to “move on” from the debates and look forward to implementing the reforms.