The UK insurance industry has set out five priorities for insurers to make the best of Brexit. The Director General of the Association of British Insurers (ABI), Huw Evans, described how “our world changed in the early hours of 24th June” in a blog published on 30 September but added that “we are determined to get the best possible outcome for the industry”. In his blog, Mr Evans identified the following five priority areas:
- To secure a new regulatory environment that is appropriate for the UK market.
- To retain the ability to passport into and out of the UK.
- To mirror closely the EU data protection regime in order to avoid great complexity about how data is protected.
- To improve future migration policy that enables the employment of high-skilled professionals from within and outside the EU.
- To put a strong focus on regulatory dialogue and international agreements in overseas financial services markets, especially India and China.
In relation to the new regulatory environment, it appears that insurers plan to push for changes to Solvency II, the EU directive that was introduced at the start of 2016 in order to harmonise insurance regulation across the EU. In comments made separately to the blog, Mr Evans said “there are certainly changes to Solvency II that could be made...There’s an opportunity to improve it in the UK”. One example of the potential changes is so-called “risk margin”, which effectively obliges insurers to hold an extra layer of capital for some long-term business. Another example is the Prudential Regulation Authority’s reporting requirements, which Mr Evans described as “pretty onerous”.
Changes may have to remain fairly measured, however, since the estimated costs of implementing Solvency II in its current form are already £4 billion. It remains to be seen to what extent Solvency II will be modified for the UK after Brexit. Indeed, at the Conservative Party conference, Prime Minister Theresa May stated that she planned to introduce a bill early in 2017 to convert all existing EU laws into UK legislation.
Overall, the ABI remained hopeful that the UK insurance industry had an optimistic future in a post-Brexit Britain. The ABI stated that although there were many challenges ahead, if “handled right...the future for the UK insurance and long term savings industry remains bright”.