(FT paywall) UK government signals post-Brexit changes to insurance rules
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The UK government is planning post-Brexit changes to some of the most contentious aspects of insurance regulation in a move likely to signal a departure from EU rules.
UK insurers must comply with Solvency II, the EU’s insurance capital regime, which came into force in 2016.
But industry executives have long complained that the rules are too complex and do not suit the way the UK insurance sector works.
Once the Brexit transition period ends on December 31, the government will be free to set its own regulations. Ahead of that, the government on Monday launched a review of the way Solvency II is applied in the UK.
At the top of the agenda is the risk margin - the part of Solvency II that is most hated by the UK insurance industry
and which has also been criticised by the regulator, the Prudential Regulation Authority.
The risk margin is an extra layer of capital that insurers have to hold against some types of long-term business such as annuities.
But insurers complain that it is too volatile, and rises too much when interest rates are low.
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Not all UK insurers are keen to see wholesale changes to Solvency II.
Life insurers, which tend to be focused on UK customers, have been pushing for changes to the regime for many years.
But the City of London’s commercial insurers, which sell cover for everything from shipping to cyber attacks, have a much more international customer base.
They are keen for the UK’s rules to have regulatory equivalence with those in the rest of the EU.
Wide-ranging changes to the UK regulatory regime could threaten that status.