A post-Brexit reform of the insurance sector

The City of London

The British government on Thursday launched a reform of the regulatory requirements weighing on insurance companies, particularly in terms of capital, hitherto governed by the European directive Solvency II, with the objective of “capitalizing on Brexit freedoms”.

The British executive opens a public consultation on Thursday on its plan to “cut through the red tape of the European Union and unlock investment” from insurance companies in the United Kingdom, a “world leader in the sector”he said in a statement.

Foremost among the measures proposed is a reduction of approximately 60 to 70% of the “margin for risk”on which depends the amount of technical provisions intended to guarantee the solvency of companies, for the long-term life insurance sector, which could free up to “10%, even 15% of the capital” held by these companies.

“Tens of Billions of Pounds” which could be channeled into long-term investments “green” and infrastructure in the UK and create jobs while “now a high degree of protection for policyholders”, assures the government. The British executive believes that the method of calculation currently in force “results in too high a risk margin for some life insurers” because she “may overestimate the market value of a company’s liabilities”.

The lowering of the “risk margin” for general insurers is also on the table. The government notes that the PRA, the banking and insurance regulator, considers “appropriate” a discount “around 30%”. Other proposals announced Thursday: increase flexibility for investments by insurance companies, significantly reduce the administrative and reporting obligations of companies in the sector or even facilitate market access for new insurers.

The government wants “go further and faster to reap the benefits of Brexit” and “strengthen the UK’s position as a global financial services hub”assured the Secretary of State for the Treasury John Glen, quoted in the press release.
The public consultation runs until July 21. The UK is working alongside financial regulatory reforms, highlighting the desire for a financial sector “agile” and but who would keep a regulation “internationally respected”.

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