The UK’s Treasury Select Committee (TSC) opened a Solvency II Inquiry in September 2016. The Inquiry, which is part of the TSC’s broader work on the UK’s post-#Brexit relationship with the EU, is considering (eg) the merits of: “retaining the effect of Solvency II as at the date of Brexit, but not incorporating any subsequent amendments to [it]“; and “revert[ing] to the old ICAS regime, [but including] the elements of … Solvency II … which are considered desirable” (if any).
Cooley hosted a (Re)insurance Market Participants’ Forum to discuss the Inquiry’s Terms of Reference, before submitting a summary of the discussion and conclusions to the Inquiry as written evidence.
Forum participants agreed that:
- UK (re)insurers and their regulators spent a “staggering” amount of time and money preparing for Solvency II;
- Policyholders, (re)insurers, regulators, and shareholders have seen some return on that investment, but it can’t yet be regarded as an investment well made;
- If the UK leaves the EU and the EEA, and it’s therefore free to vary or revoke its Solvency II implementing rules, it “would not make any sense” to do so. In fact, it would be “a shameful waste of money” and “utter madness” to try;
- Solvency II, or at least the UK’s approach to Solvency II, has been “disproportionate”. However, the answer is to “smooth off the rough edges” – not repeal and replace it;
- The ongoing cost of compliance with Solvency II, or the UK’s version of it, may well be higher than the cost of compliance with the alternatives, but it’s a price worth paying if that will help the UK to retain the (re)insurance passport or secure Solvency II equivalence;
- Even if the passport can’t be retained, and equivalence isn’t available, the cost of change, and the risk and uncertainty associated with it, cannot reasonably be regarded as a price worth paying merely for lower compliance costs later on.
More to follow…