EU rules on Solvency II will be scrapped, chancellor Kwasi Kwarteng announced in his mini Budget and growth plan.
The move aims to “unleash the potential of the UK financial services sector” as the government plans to “scrap EU rules from Solvency II to free up billions of pounds for investment”, he said. These will be replaced by “rules tailor-made for the UK”. The government will publish details on Solvency II reform later in the autumn.
Lane Clark and Peacock (LCP) de-risking partner Charlie Finch welcomed the announcement but said that any reforms must not harm policyholders’ security. “We fully support changes that will allow insurers to be more competitive and make the Solvency II rules better fit for purpose,” he said. “However, it is vitally important that, in the rush to promote growth, the reforms do not undermine policyholder security.
“In just the past three years, more than £100bn has been put into annuities by defined benefit pension plans through buy-ins and buy-outs. This was on the grounds that the UK insurance regime is one of the most robust in the world, providing a safe, long-term home for people’s pensions.”
His colleague, LCP insurance team partner Charl Cronje, called for a post-Brexit regulatory regime to reintroduce “the ability for all firms to use models that appropriately reflect their risk profile and help with real-world risk management, rather than a rigid standard formula”.
ABI director general Hannah Gurga said the pensions industry had long called for regulatory change to enable more investment into infrastructure that supports growth and the drive to net zero. “As the chancellor recognised, more can be done to unlock investment, and the insurance and long-term savings industry has a vital role to play as institutional investors.”