Insurers welcomed proposals released yesterday detailing potential post-Brexit reforms to the EU’s Solvency II regime.
The EU’s Solvency II regime imposed rules on how much capital insurers had to hold and where it could be invested.
Plans to reform the regime were announced last year and are designed to unlock billions in capital from the balance sheets of insurance companies to invest in core UK infrastructure.
The industry got its first glimpse of the possible changes yesterday after the PRA put forward its consultation on how the rules could be changed.
Among the proposals were plans to move towards a more principles based system for assessing firms’ internal models, taking away some of the more onerous requirements that firms must meet.
Firms will also be given greater flexibility in how they calculate capital requirements.
The proposed changes were welcomed, with many in the sector saying they could help spur a new wave of investment in UK infrastructure.
“This is another important step towards introducing Solvency UK and enabling our sector to play an even greater role in supporting investment in UK green infrastructure,” the Associated of British Insurers said.
Similarly a Phoenix Group spokesperson said: “We believe Solvency II reforms are critical in enabling significantly more investment in productive assets in the future.
“If the reforms are implemented in the right manner and we are given access to transformative investment projects that offer an attractive returns profile in the long term, Phoenix Group could invest up to £40bn in sustainable and/or productive assets to support economic growth, levelling up and the climate change agenda,” they continued.
KPMG UK insurance partner, Huw Evans said the proposals appear “sensible” and that they maintained “a robust risk-based capital framework consistent with our European neighbours and international best practice.”
Evans noted that the new rules would be introduced in the UK before the latest round of EU reforms.
He also pointed out that most of the benefits to the reforms would be felt by foreign insurers operating in the UK rather than established UK firms. One of the key aims of the reforms is to boost the international competitiveness of the UK’s insurance sector.