Insurance regulatory news, February 2021 # 3

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Recent regulatory developments of interest to insurers and their intermediaries. See also our General regulatory news in the Related Materials links.

Contents

  • Insurer capital requirements: PRA speech
  • Future opportunities for the insurance industry: ABI speech

Insurer capital requirements: PRA speech

The UK Prudential Regulation Authority (PRA) has published a speech by Anna Sweeney, PRA Executive Director, Insurance, titled "Goldilocks and the three pillars: how much capital is just right?". In her speech, Ms Sweeney explains the PRA's thoughts about the relationship between capital requirements and the rest of the prudential regime, in the context of the government's review of Solvency II. Points of interest in Ms Sweeney's speech include:

  • the PRA is committed to upholding the principles of Solvency II and sees no appetite to tear them up and start again. The top level goal of the review is instead to tailor a regime based on those principles to the UK market. Tailoring will mean reforms to specific aspects of the regime that are not well-designed or imperfectly calibrated for the UK, and are currently distorting incentives and behaviour, for example, the risk margin;
  • however, the PRA enters the Solvency II review with no goal of either decreasing or increasing total capital in the sector. Ms Sweeney states that the PRA has not been presented with persuasive evidence that current levels are manifestly too high or too low; and
  • the PRA does not think of capital requirements in isolation, but as part of a three-pillar regulatory regime (that is, capital, risk management, and disclosure). Within this broader framework, the PRA considers the strength of market discipline, the ladder of intervention, and the way that firms structure themselves to judge when the level of capital is "just right". Ms Sweeney talks about each of these in turn.

Future opportunities for the insurance industry: ABI speech

The Association of British Insurers (ABI) has published a speech, given by James Dalton, ABI Director, General Insurance Policy, on the future of the UK insurance industry post the Brexit transition period and learning lessons from the COVID-19 pandemic.

Mr Dalton talks about the FCA's business interruption insurance test case and the impact of COVID-19, the FCA's general insurance pricing practices consultation, the review of Solvency II, climate change, the economic contribution of the industry and insurance following the end of the Brexit transition period.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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