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Solvency II, introduced at the start of the year, was designed to harmonise insurance regulation across the EU. But some of the rules have raised the hackles of the UK’s big insurers, which complain that they make it more difficult for them to do business.
One of the most contentious areas is the so-called risk margin, which is in effect an extra layer for capital that has to be held for some types of long-term business. ABI chief executive Huw Evans said there could be changes to the Prudential Regulation Authority’s reporting requirements, which he said were “pretty onerous”.
The ABI is also concerned about the prospect of the UK losing its seat at the negotiating table when it comes to future changes to Solvency II.
Although the UK might be free to create its own rules post-Brexit, insurers warn that the new regime would have to have “equivalence” with EU rules, so the future shape of Solvency II will have a bearing on how UK insurers operate.
Possible changes to Solvency II have already attracted interest elsewhere. Earlier this month, parliament’s Treasury select committee launched an inquiry into how the regime would operate in the UK after Brexit.
The ABI’s submission also focuses on the need, post-Brexit, to maintain common rules on how companies use data. “The data point has had the least air time,” said Mr Evans. “The key thing is to ensure that we don’t have our own data regime. That would be terrible … it has the potential to be a massive disruptive effect.”
Among the other points that the ABI raised with the government was a desire to maintain passporting rules, which the insurance industry uses extensively, and the need for a migration regime that will allow the industry to recruit skilled staff from around the world.
Full article on Financial Times (subscription required)