The Bank of England (BoE) has reassured UK’s biggest insurance companies that they will not be unduly impacted by tougher capital requirements under the new Europe-wide Solvency II regime.
With Solvency II due to be introduced from January 1 2016, the BoE’s acting head of insurance supervision told the industry that the regulation “seeks to promote a better understanding of the risks being taken” rather than trying to dictate business models.
“I have said this before but I think it is worth reiterating,” said Paul Fisher of the BoE’s Prudential Regulation Authority (PRA). “The PRA believes the UK industry is in a good position, having had the UK risk-based individual capital adequacy standards [ICAS] regime for around 10 years. We are therefore not looking to use Solvency II as an opportunity to raise capital requirements across the board.
“We do, however, recognise and respect that Solvency II is a maximum-harmonising Directive with a key objective of promoting supervisory co-operation. The PRA is committed to upholding this valued objective and will implement the Directive as intended. We can’t and won’t gold plate.”
UK insurers such as Prudential, Legal & General and Aviva have been preparing for Solvency II, since it was first proposed by the European Commission (EC) in 2007 to create a single set of regulation for the industry.
The rules have faced numerous delays, caused by efforts to incorporate safeguards against another financial crisis, although many in the industry contend that it was mostly banks, not insurers, at the heart of the credit crunch.
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