Out-Law News | 15 Jan 2018 | 9:49 am | 1 min. read
The consultation, which closes on 13 April, is the third in a series of consultations on potential "targeted improvements" to the rules to be published by the PRA since October. These came in response to lobbying from MPs on the Treasury Committee and the UK's insurance industry, who have claimed that the UK was particularly stringent when implementing the regime in January 2016.
The Association of British Insurers (ABI) welcomed the consultation as "a step in the right direction". It said that the reporting burden for UK insurers had increased by between four and eight times since Solvency II came into force.
"These changes are part of a broader set of reforms that the UK insurance industry has proposed and the Treasury Select Committee recently endorsed," said Steven Findlay, who is head of prudential regulation at the trade body. "There still remains plenty of opportunity for the PRA to go further to ensure our insurance industry is able to fulfil a vital role in helping Britain thrive post-Brexit."
He added that the proposed changes would be "particularly helpful to smaller firms in easing this disproportionate burden they are facing".
The Solvency II regime came into force across the EU on 1 January 2016, after various delays. The rules, which apply in the UK to more than 400 retail and wholesale insurance firms as well as to the Lloyd's insurance market, set out broader risk management requirements for European insurers and require firms to hold enough capital to cover all their expected future insurance or reinsurance liabilities.
Solvency II has been billed as a 'maximum harmonising' regime, which should in theory give national regulators little scope to impose requirements that go beyond those required by the EU rules. The PRA, in response to a Treasury Committee report, has since proposed tweaks to the rules around the matching adjustment, the model change process and, now, reporting requirements.
The PRA's latest proposals are designed to "reduce the burden for Solvency II firms and mutuals whilst maintaining the PRA's ability to meet its statutory objectives and to supervise firms", the regulator said in a press release. They include limiting certain reporting requirements applicable to with-profits firms to those with liabilities of over £500 million; bringing certain reporting templates more into line with those in the Directive; and being more open to applications for waivers from quarterly reporting obligations from smaller firms.
"Consideration of a waiver will remain the subject of supervisory judgement, prioritisation of the smallest firms, and the constraining market share limits," the PRA said in the consultation paper.