LONDON (Reuters) – Britain is considering a “quick win” reform of capital rules for insurers after the Brexit transition period ends, a senior Bank of England official said on Wednesday.
The rules were inherited from the bloc and Brexit gives Britain a free hand to amend them, with lawmakers saying changes are needed to keep insurers competitive.
BoE regulators will look to rejig so-called Solvency II regulations in Britain as quickly as it can, Victoria Saporta, executive director of prudential policy at the BoE, told the Reuters Events Future of Insurance Europe conference.
The central bank has a long list of items for potential reform, she said.
“If we see that there are certain quick wins, and there could well be some quick wins in regulatory reporting for instance, then we might be able to deliver them,” Saporta said.
Areas of focus include tweaking risk margins, regulatory reporting and rules around Libor, Saporta said, adding that regulators would need to work with the Treasury and Parliament, meaning some changes will take longer due to the need for changes in the law.
“And also, we really really do need to look at the evidence and provide a sort of very careful assessment.”
The risk margin refers to the potential cost for a failing insurer to transfer its policies to a third party and doesn’t cover actual expected claims.
Julian Adams, head of public policy and regulation at insurer M&G, said the Treasury has identified the right areas to reform Solvency II.
“There are definitely good grounds to re-examine the construction of the risk margin,” Adams said, adding that the review should also consider how insurers can help more with “green” investments.
The EU is also reviewing Solvency II and Dimitris Zafeiris, head of financial stability at the European Insurance and Occupational Pensions Authority, said at the conference that reform would be “evolution rather than revolution”.
“Overall, the insurance solvency framework works,” Zafeiris said.
Felix Hufeld, President of German regulator BaFin, said some of the “key pillars of Solvency II do deserve a brush-up”, especially to make it more “proportional” for smaller insurers.
Additional reporting by Carolyn Cohn; Editing by Kirsten Donovan