Economic Secretary to the Treasury, John Glen MP, has delivered a speech to the Association of British Insurers Annual Dinner which set out bold reforms to Solvency II. The proposed reforms include:
- a substantial reduction in the risk margin including a cut of around 60-70% for long-term life insurers;
- a reassessment of the fundamental spread used to calculate the matching adjustment, in order to better reflect its sensitivity to credit risk;
- a significant increase in flexibility to allow insurers to invest in long-term assets such as infrastructure; and
- a major reduction in the current reporting and administrative burden on firms.
Mr Glen said that the new UK regime will facilitate market developments, support the entry of new and innovative firms and allow for the release of capital for productive investment.
Treasury intends to launch a consultation on the proposed UK reforms to Solvency II in April 2022. This will be followed by a more detailed technical consultation by the PRA later in the year.