On 13 September 2016, the House of Commons Treasury Select Committee announced that it was launching an inquiry into Solvency II Directive (2009/138/EC) (“Solvency II”), the new regime for the regulation of insurance, which came into force on 1 January 2016.
According to the Treasury Select Committee webpage, there had been fears that Solvency II would impose substantial costs on the insurance industry. The Committee notes that it has already heard evidence suggesting that the UK’s decision to leave the EU on 23 June 2016 provides an opportunity to also leave the Solvency II arrangements, and that doing so would benefit insurance companies. The inquiry seeks to assess the impact of Solvency II, and the options now available to the UK in further detail.
The terms of reference for the inquiry have also been published, setting out the key questions that will be put to the insurance industry and interested parties. These revolve around the following key areas:
- Competitive implications of Solvency II
- Development of Solvency II
- Implementation of Solvency II
- Safety and soundness
- Financial reporting
- Wider implications of Solvency II
Although Solvency II has been in force since January, firms are still adjusting to the requirements of the new regime. The UK’s decision to leave the EU has added a further dimension to this as firms consider the extent to which a Brexit may result in a departure from the rules. Whilst the expectation is that the Solvency II rules will remain in place for the foreseeable future, the outcome of the consultation will make for interesting reading, and in particular, is likely to provide a sense of current industry sentiment regarding the Solvency II regime.
Much has been made of the need for the insurance industry to lobby the government and regulators so as to ensure their voice is heard in the debate over Brexit. Firms should see this as a useful opportunity to raise their views on Solvency II in the context of the various options under Brexit.
The deadline for written submissions to the Treasury Select Committee is 11 November 2016.