The Bank of England passed all the British insurers that had applied to do their own calculations on how much capital they would need ahead of the EU’s overhaul of the region’s €8.4tn insurance industry.
No insurer received a rejection letter on Saturday when the BoE’s Prudential Regulation Authority decided which companies could use their own bespoke models to calculate how much capital they must hold under a doomsday scenario, people familiar with the situation said.
The PRA said at the weekend that 19 companies had received approval for their so-called Solvency II internal models, including Aviva, Prudential and Legal & General. But it did not specify how many insurers in total had applied to the approval process so it was at first unclear whether any had failed.
Analysts had predicted before the announcement that while the majority of companies would pass, there may have been some whose models were rejected.
About 120 UK insurers were initially interested in putting plans for approval to the regulator. Insurers that do not have approved internal models to work out the size of their capital buffers must instead use the EU’s standard calculations. This cruder formula laid down by regulators may oblige insurers to hold more capital, depending on the mix of each business.
“Despite the reduction from 120, [the PRA] will have reviewed significantly more models than any other European regulator,” said Jim Bichard, a Solvency II expert at PwC.
Full article on Financial Times (subscription required)
Prudential Regulation Authority grants Solvency II internal model approvals
© Financial Times
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article