Prudential Regulation Authority (PRA) chief executive Sam Woods has reportedly told parliament that insurance companies are overstating the issues regarding Solvency II.
Woods said on Wednesday before the parliament’s Treasury Select Committee that Solvency II is “basically a sensible regime,” Reuters reported.
However, he admitted that Solvency II, which sets out capital rules for EU insurers, needs some changes.
Continue Reading “PRA says insurers exaggerating Solvency II problems – report” at Insurance Business News
The capital regime for the insurance industry needs “fundamental” review, a committee of MPs has been told.
Legal & General and Prudential both appeared before the Treasury Select Committee yesterday (25 January) to criticise the Solvency II regime.
The cross-European regime came into effect a year ago and sets out how much capital insurance companies must hold to reduce the risk of insolvency.
Continue Reading “Insurers warn of Solvency II impact ” at FT Adviser News
One of the UK’s biggest insurers has accused regulators of becoming more interventionist in their oversight of the industry, suggesting the role should be scaled back.
Legal & General said that under new Solvency II rules, the Prudential Regulation Authority is “effectively overruling the judgment of the board” when it comes to setting capital requirements, and is taking a more “directive” approach when approving transactions.
“Boards do not feel empowered to make commercial decisions without reference to the regulator,” it said.
Legal & General would like audit firms to take over some of the work carried out by the PRA, especially that related to internal capital models. “The regulator could then opine on the more strategic issues which impact its statutory objectives,” it said.
Continue Reading “Legal & General Accuses Regulator of Increased Intervention” at Financial Times Advisor
All senior staff with “significant levels of responsibility” within large UK-regulated insurers should be subject to the same remuneration requirements, the Prudential Regulation Authority (PRA) has confirmed.
The regulator has issued a draft supervisory statement setting out its expectations of firms subject to the EU-wide Solvency II regulatory regime (22-page / 869KB PDF), after its own review of industry remuneration practices found that firms were confused about which staff were subject to the new rules and “significant discrepancies” in the ways in which they dealt with deferral of a certain proportion of variable pay.
In its statement, the PRA said that it was important that all firms applied the rules the same way in order to prevent a “race to the bottom”, in which firms were “able to compete for staff resources by adopting lower than the industry standard”.
Continue Reading “All Solvency II firms should apply remuneration requirements in the same way, says UK regulator” at Out-Law News
UK non-life insurer Direct Line has submitted its application to use a partial internal model to calculate its capital requirements under Solvency II.
The application was sent to the UK’s Prudential Regulation Authority in December and the authority has six months to respond.
The insurer began 2016 using the standard formula and reported a solvency ratio of 147% as of 31 December 2015, post the dividend payment and assuming that expected changes to hedging arrangements were in place by that date.
The group internal model is expected to reduce the £1.68bn ($2.35bn) capital requirement and more accurately assess the company’s risk, but there will be no “step change” in capital requirement, said group chief financial officer John Reizenstein in the firm’s annual results call.
Continue Reading “Direct Line anticipates internal model approval by June” at Insurance ERM News
The chief executive of the Prudential Regulation Authority has been asked to find out what the cost of implementing Solvency II was to the industry.
Andrew Bailey, who will take over as chief executive of the FCA once a replacement can be found for him at the PRA, was asked to look into the cost of Solvency II by the chairman of the Treasury select committee Andrew Tyrie.
The request came during a hearing on the costs and benefits of Britain’s membership of the European Union.
Solvency II is a European-wide regulation that specifies the levels of capital that insurance companies must hold and was more than 10 years in the making.
Continue Reading “PRA chief must calculate cost of Solvency II” at FT Advisor
Prudential will this week set a benchmark for rivals by becoming the first of the UK insurers to reveal its capital ratio under the new Solvency II rules that came into force at the start of the year.
The Solvency Capital Ratio is a measurement of the amount of capital an insurer has as a proportion of the minimum requirement.
For 2014, Prudential reported a capital ratio of 218 per cent but analysts are expecting a lower number under the new rules.
“I am expecting something in the 180-190 per cent range,” said Barrie Cornes at Panmure. Analysts at Bernstein are also expecting a figure between 180 and 190 per cent, while UBS expects it to be above 180 per cent.
Continue Reading “Prudential to make first move on new capital rules” at Financial Times
British insurers Aviva and Prudential and the Lloyd’s of London insurance market were among 19 firms to have their capital calculation models approved by the Bank of England on Saturday, enabling them to lower costs under new rules.
Approval means the insurers can use their internal models to determine how much capital they hold to ensure they can meet policyholder commitments under European Union Solvency II capital rules that come into force next month.
Without such endorsement, firms must use a standard calculation method of their solvency set out by regulators, which typically leads to higher capital requirements. That could force companies to raise fresh capital or put pressure on dividend payments to shareholders.
Continue Reading “Bank of England approves capital models for 19 UK insurers” at Reuters News
The Bermuda Monetary Authority’s (BMA) final push to gain Solvency II equivalence has led to the adoption of a group Economic Balance Sheet (EBS) in 2016.
The assessment of required and available capital against an economic view of company net assets underpins many of the regulatory changes that have taken place globally in recent years.
A BMA spokesman said: “EBS will supplement the authority’s existing group risk-based capital requirement, own risk and solvency assessment (ORSA) and other risk management and governance components which comprise the group prudential return.
Continue Reading “BMA push tips the balance in favour of Solvency II equivalence” at Intelligent Insurer News
The global economy is still quite uncertain, despite the occasional whiff of brighter news here and there. On a larger scale, there has been no turn for the better so far, and the general interest rate level has remained low.
In its review last spring, the IMF warned about the potential threat posed by low interest rates and the challenges put forward by the forthcoming Solvency II regulation to European life insurers.
The EU’s Solvency II directive, scheduled to take effect at the turn of 2016, introduces a common approach to prudential regulation and modernises the existing regime, with a view to introducing clearer and more consistent protection for policyholders.
In short, the regulation hones in on European insurers, their understanding and management of risk, and their resilience to any sudden shocks in the market.
Recognising that insurance firms have an important part to play in quantifying and managing risks for both businesses and individuals, the Solvency II requirements acknowledge that the sector must be made to withstand market volatility if it’s to serve its purpose.
Continue Reading “Nordea Life finds success in simplicity” at World Finance News