European Insurance: Solvency II (5 December 2016)

OAC Digest
Life insurance, Non-Life, PRA / Bank of England, SIMR, Solvency II

05 December 2016

Selected recent Solvency II news items: 

In the latest Financial Stability Report (published 30 November), the Bank of England repeat concerns that the sensitivity of the Solvency II risk margin incentivises procyclicality (i.e. "reinforce falls (rises) in risk-free interest rates by switching into (out of) low-risk assets"). 

The PRA's response to Treasury Select Committee's inquiry into Solvency II has now been published. Whilst the majority of the content deals with an overview of the new regime, the PRA's implementation and the deemed complementary SIMR, the regulator makes clear the support for reforms in specific areas and which allow for global developments. Specific instances where Solvency II is seen as not working as intended include the volatility of the risk margin, with the PRA favouring a design that "delivers more stable outcomes". The Prudential has also responded to the Committee and encourages the UK authorities to look at targeted changes to the risk margin also and a number of other areas.

David Gray

For more information
David Gray
Consultant Actuary

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