Anna Sweeney has spoken on the Solvency II review and how much capital is enough. She stressed that PRA wants to get its reforms right, and to see them within the context of the entire relevant package of measures. She said PRA has no goal to either increase or decrease total capital and in fact has no evidence at the moment to suggest there is any particular need for change.
She spoke of the three pillar regulatory regime, and the importance of each pillar. Market discipline is never wholly absent from the sector but it is important that it is strong where it needs to be, so policyholders have visibility of the risks their insurer faces. The qualitative measures in pillar 2 (intervention and risk management) form the “ladder of intervention”, so regulators can intervene before the interests of shareholders and policyholders diverge. Regulatory capital buys that time for intervention, and ease of exit is a consequence of good risk management. Generally, PRA feels it strikes the right balance between risk management and insurers’ ability to price competitively, but is still welcoming views on what is “just right”.