The UK has finalised new rules to replace Solvency II following a four-year long review of the European regime inherited when the country was part of the EU.
After a series of consultations, the Prudential Regulation Authority (PRA) said its final rules are more streamlined and flexible, “enabling opportunities for productive investment in the UK and facilitating entry into the UK insurance market”. At the same time, the new regulatory framework will maintain the safety and soundness of insurance firms and continue to protect policyholders, the PRA said.
Sam Woods, CEO of the PRA, said the UK’s new capital adequacy regime for insurers, known as Solvency UK, will be implemented in full from the end of this year. “This is a significant milestone, marking the end of four years of intense work to deliver our post-Brexit framework for the insurance sector,” Woods said.
The UK’s existing Solvency II law will be revoked on 31 December.
The new rules feature changes to reporting and disclosure requirements, as well as reforms to the matching adjustment.
The PRA has also opened a consultation proposing changes to the UK’s insurance special purpose vehicle (SPV) regulations, which the supervisor said will make more diversified reinsurance capital available to cedants. The planned changes would also speed up approval for SPVs in the UK. They would put in place an accelerated pathway that could see approvals for some types of catastrophe bonds within ten working days, slashing the current approval time process of between four and six weeks.
Woods said: “These reforms will deliver a much faster turnaround time for approval of new Insurance Special Purpose Vehicles in the UK, supporting growth and competitiveness while maintaining safety and soundness.”
The SPV consultation period is open until 14 February 2025, with final policy expected to be published in mid-2025.
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