LONDON -Britain’s review of insurance sector rules inherited from the European Union will not increase policyholder protections but could increase reliance on stress testing for determining capital levels, the Bank of England said on Tuesday.
Britain wants to tailor the Solvency II rules to UK insurers, which it can do now that it has left the EU.
Anna Sweeney, the BoE’s executive director for insurance, set out Tuesday the next stages of the review.
“It’s our view that, in the round, the current regime provides about the right amount of protection for policyholders,” she told a JP Morgan European Insurance conference.
“We do not pursue a zero failure regime and we don’t have aspirations to further strengthen this protection as part of the Solvency II review,” she said.
Before making specific proposals for change, the BoE will this summer send out a qualitative impact survey to insurers.
It will ask for data on the risk margin, used for transferring assets, and the matching adjustment, which allows a firm to recognise an immediate benefit from future returns.
The BoE will run its next stress test of insurers in 2022, and has “aspirations” to use this regular exercise more centrally for setting capital requirements.
Results from the test will allow the BoE to better understand if there are any gaps in resilience of insurers which need to be plugged, Sweeney said.
“We intend to consult on any potential changes needed to our approach early next year, alongside the broader Solvency II review consultation,” she added.