Bank of England defends insurance rule reform stance

• The Bank of England has mounted a staunch defense of its approach to reforming UK insurance rules.
• The Solvency II framework, inherited from the EU, dictates how much cash companies must maintain and where they may invest.
•  PRA stated that insurers should not be given a “free lunch” in the form of a capital release.

The Bank of England has mounted a staunch defense of its approach to reforming UK insurance rules, amid growing political and industry pressure.

The Prudential Regulation Authority of the Bank of England, which oversees insurers, is collaborating with the Treasury on long-awaited modifications to the Solvency II framework.

The rule, inherited from the EU, dictates how much cash companies must maintain and where they may invest.

The government has conducted a consultation on revising the rules, touting it as one of the most significant “Brexit rewards.”

However, the PRA stated that insurers should not be given a “free lunch” in the form of a capital release as a result of rule adjustments without additional regulatory tightening.

One of the most important uncertainties surrounding the change is whether the government would overrule the PRA’s concerns so that insurers can invest in UK infrastructure more readily.

Sam Woods, CEO of the PRA, stated on Friday that “millions of pensioners’ livelihoods depend on doing this right.”

“If adjustments simply loosen EU-overcooked standards without addressing other areas where regulations are excessively lax, then we put policyholders in danger,” he continued.