The Bank of England has told insurers not to expect any big reductions in capital requirements after Brexit, adding that more capital could be “part of the answer” to meeting a £1.7bn bill for Covid-19 claims.
Solvency II rules, inherited from Britain’s membership of the EU, are under review, amid calls from insurers and lawmakers for changes to keep the sector competitive.
The rules seek to harmonise EU insurance regulation between states, and primarily concern the amount of capital that EU insurers must hold to reduce the risk of insolvency.
“We are committed to upholding the principles of Solvency II – they are our principles, and given the amount invested by firms in implementing the Solvency II regime, we see no appetite to tear them up and start again,” said Anna Sweeney, the BoE’s executive director for insurance, speaking at a Westminster Business Forum conference.
The Association of British Insurers told the conference that the sector faces a £1.7bn bill for claims relating to the Covid-19 pandemic, raising questions about whether insurers need to find fresh capital.
“We are not leaping to conclusions that the industry needs tons more capital, but the issue has highlighted the range of contract uncertainty out there and there clearly needs to be a better understanding of what that looks like,” Sweeney continued.
Capital may be a “part of that answer” she said, but not before the Bank of England has engaged with the industry in a “more thought through” discussion.