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The proposals include further streamlining of reporting requirements for all firms and substantially simplifying and improving the flexibility in the assessment of internal models. They will also foster new entrants into the UK insurance market by easing entry of new firms and simplifying the regulation of international insurers operating through branches.
Sam Woods, CEO of the PRA said: “These measures will reduce bureaucracy, facilitate competition, and support UK economic growth and competitiveness without lowering prudential standards or weakening policyholder protection.”
The PRA’s reforms are designed to:
Eliminate onerous requirements: This includes streamlining reporting requirements to reduce administrative burdens on insurers, building on previous reporting reforms already implemented by the PRA, and simplifying the calculation process for the transitional measure on technical provisions (TMTP) to reduce costs and complexity.
Improve flexibility: By moving towards a more principles-based approach to assessing firms’ internal models, thereby reducing significantly the number of detailed requirements that firms must meet. The proposals will also allow more flexibility in the calculation of group capital requirements and will apply proportionality by increasing the size thresholds at which small insurers are required to enter the Solvency UK regime.
Encourage entry and build competition: By introducing a ‘mobilisation’ regime which will allow newly authorised insurers more flexibility as they set up in the UK, as well as by raising the thresholds above which Solvency UK will apply.
Build competitiveness: By removing certain requirements for branches of international insurers operating in the UK.
These reforms form part of a wider package which will be implemented through a combination of government legislation and PRA rule changes. In line with the government’s legislative plans, some reforms are expected to be implemented by the end of this year, and the remainder in 2024.