The PRA has published its final rules on how it will implement the Solvency II directive.
The directive puts in place a consistent solvency and capital adequacy framework for insurers across Europe and aims to provide greater protection to policyholders by reducing the probability of an insurance firm failure.
From the start of April, firms can submit applications for Solvency II approvals though the regime will not start until January.
Andrew Bailey, chief executive of the PRA, said: “Solvency II represents a fundamental change in the way that insurers are regulated.
“The papers published today provide clarity for UK firms on how the PRA will implement the new regime, acting in the interests of the wider economy and ensuring an appropriate level of policyholder protection.
“These publications will allow firms to finalise their preparations for Solvency II in order to be ready for the start of the regime on 1 January 2016.”
Insurers can reduce the level of risk on some types of long-term liabilities, such as annuities, if they hold closely matched, long-term assets to back them.
Adviser view
Colin Parkin, managing director of Lincolnshire-based Ample Financial Planning, said: “From a customer’s point of view you would want to know you were dealing with a company that’s solvent, and it can have big knock-on effects when they are not.”
