Treasury consults on Solvency II reforms

The government has launched a consultation on reforms to the Solvency II regime in an effort to unlock ‘tens of billions’ of pounds of investment for UK infrastructure and green projects.

Economic Secretary to the Treasury, John Glen, first announced plans to reform the EU-focused regulation at the Association of British Insurers annual dinner in February 2022.

The consultation sets out detail on the reforms, such as a reduction in the risk margin for long-term life insurers, including a cut of around 60-70 per cent, and asking respondents what the appropriate level for general insurers would be.

It also proposed increased flexibility to allow insurers to invest in long-term assets, such as infrastructure, and a “meaningful reduction” in the current reporting and administrative burden on firms, including doubling the thresholds for the size of insurers before the Solvency II regime applies.

A more sensitive treatment of credit risk in the matching adjustment is being consulting on, as the government said that the matching adjustment provided incentives for insurers to issue long-term life insurance products by ‘matching’ them against assets with similar characteristics.

The government is seeking to increase access to the market for new insurers and offer greater consumer choice and has therefore proposed introducing a new ‘mobilisation regime’ to encourage new insurers to the market.

These proposals are part of wider changes proposed by the Treasury to the UK’s financial regulatory framework, which aim to provide a “coherent, agile and internationally respected” approach to financial services regulation.

“Today’s consultation demonstrates our commitment to go further and faster to deliver the benefits of Brexit,” commented Glen.

“Our reforms will unlock tens of billions of pounds of investment in the UK economy, spur innovation in the market while protecting policy holders - and will cement the UK’s position as a global hub for financial services.”

The consultation will run until 21 July, with the government to then consider and publish a response to the consultation “in due course”.

The Prudential Regulation Authority will also be publishing a consultation “at a later date”.

    Share Story:

Recent Stories


Making pension engagement enjoyable through technology
Laura Blows speaks to Nick Hall, business development director and Chartered Financial Planner at UK-based Wealth Wizards about the opportunities that technology provides for increasing people’s engagement with pensions and increasing their retirement wealth. Please click here for an edited write-up of the video

ESG & DC – creating the right tools
In the latest of our series of Pensions Age video interviews Francesca Fabrizi, Editor in Chief of Pensions Age is joined by Manuela Sperandeo, Head of Sustainable Indexing EMEA, BlackRock and Mark Guirey, Executive Director, Asset Owner and Consultant Coverage - MSCI to discuss some key trends of ESG investing among UK pension funds today. Please click here for an edited write-up of the video

Savings and finance at retirement
Laura Blows is joined by Claire Felgate, Head of Global Consultant Relations, UK, at BlackRock, to discuss savings and finance at retirement. Please click here for an edited write-up of the video

Cost transparency
Pensions Age editor, Laura Blows, discusses investment cost transparency and savings with Aon’s Neil Smith and Chris Hawksworth. Please click here for an edited write-up of the video
Multi asset credit
Pensions Age editor, Laura Blows, discusses multi asset credit with Royal London Asset Management senior fund manager, Khuram Sharih

Advertisement Advertisement