The UK Government has started the first stage of reviewing the Solvency II regulation by calling upon the UK insurance industry for evidence.
On 23 June, Rishi Sunak, the chancellor of the exchequer announced in a statement that the UK government plans to bring forward a review of certain features of Solvency II to ensure that it is properly tailored to take account of the structural features of the UK insurance sector.
The Solvency II directive, which came into effect on 1 January 2016, is a European Union law that codifies and harmonises the EU insurance regulation.
However, in light of Brexit and the end date for the transition period fast approaching, the UK Government’s aim of the review is to “ensure that Solvency II properly reflects the unique structural features of the UK insurance sector”.
The main objectives of the review are “to spur a vibrant, innovative, and internationally competitive insurance sector”.
It wants “to protect policyholders and ensure the safety and soundness of firms”.
The review is also designed to support insurance firms to provide long-term capital to support growth, including investment in infrastructure, venture capital and growth equity, and other long-term productive assets, as well as investment consistent with the government’s climate change objectives.
John Glen, economic secretary to HM Treasury, stated: “This review emphasises potential areas for reform of Solvency II that could not only improve the efficiency and effectiveness of the application of the UK prudential regulatory regime but also allow it to better recognise the unique features of the UK insurance sector.”
“As a result, households and businesses should benefit from a wider choice of competitively priced products and services and the Prudential Regulation Authority (PRA) should have the tools that it needs to supervise the safety and soundness of the UK insurance sector,” Glen added.
The call for evidence will be open for responses until 19 January 2021.
Additionally, Solvency II is currently under review by the EU authorities. In July, the European Commission announced that they had launched a public consultation on the review of Solvency II. The deadline for the consultation closed on the 21 October 2020.
