After ten years of preparation and a £3bn investment from the UK industry, insurers and reinsurers are ready to implement the new regime from 1st January 2016.
Solvency II is a European wide regulation, which specifies the levels of capital that insurance companies must hold. It will encourage good risk management, and further increase transparency and disclosure. Solvency II is designed to increase confidence for customers when buying insurance.
More than 400 UK firms are expected to be within scope, and over 3,200 pages of Solvency II regulatory text will be published, which firms must comply with, by the European Commission and the European regulator, EIOPA.
Under Solvency II, firms will have to hold enough capital to survive a 1 in 200 year stress on their balance sheet.
19 UK firms received approval from the Bank of England to use their own Internal Model to calculate their capital requirements, three times more than any other EU state. More UK firms will be using Internal Models as part of insurance groups based elsewhere in the EU.
ABI Director General Huw Evans said:
“The UK industry has supported the objectives of Solvency II since the beginning and invested significant time and resources to ensure it works as intended for the market. With firms now having confirmation about their Internal Models, the industry is well prepared to transition to Solvency II in January.”
“The UK industry has high levels of capitals already, so policyholders can be reassured that they will not notice a difference in the transition. The new regime will ensure customers can continue to have confidence in the products they buy, and know their claim or annuity will be paid.
“As we move to Solvency II, time should now be given for this change to settle in before any further reform. To ensure Solvency II creates a level playing field, and the competitiveness of the UK industry continues, a convergent and consistent approach to these rules is needed across Europe.”
