As the European Union and the UK remained deadlocked over talks around a future trade deal, insurers have welcomed the news that consultation over a new solvency regime has begun.
UK Prime Minister, Boris Johnson, has told UK business to prepare for the UK’s departure from the European Union with no deal and told the EU’s chief negotiator to cancel his planned trip to London this week unless he is bringing with him significant concessions to the current EU position.
Yesterday saw the launch of the UK’s consultation process for the country’s solvency regime which will replace the single market’s Solvency II regulations.
It is likely to see a degree of disagreement between the life and non-life underwriters as Solvency II was not popular with the life market due to the way it treated investments in terms of reserves. There is also likely to be push back from some in the London market who may lobby for a reduction in the level of reserving needed for some classes which are defined by low volume, high value claims
The consultation has been welcomed by the Association of British insurers which said UK firms needed a system which allowed them to invest, calling for a more flexible approach than that of Solvency II.
“We welcome the Government’s review of Solvency II,” Huw Evans, (pic) Director General, ABI said. “As we leave the EU transition period, we need a regulatory system that enhances UK international competitiveness and allows insurance and long-term savings companies to invest for the long-term to help tackle climate change and rebuild the UK economy post-Covid.
“The long-term liabilities of insurance and long-term savings companies make them natural investors for the long-term but the current Solvency II framework discourages investment in sustainable assets and is overburdened with reporting requirements. This review is an important opportunity to make sure that the UK’s future regulatory regime works for the UK economy and does not place unnecessary constraints on the ability of firms to invest.
“In particular, a more flexible approach to Solvency II is critical in order to unlock more of the £250 billion assets that back UK annuities and could be used for investment in infrastructure and sustainable technology.”