The UK industry is well prepared for the biggest reform to capital rules in a generation, the Association of British Insurers said today (18 December).
Solvency II, a European wide regulation, which specifies the levels of capital that insurance companies must hold, comes into force from 1 January 2016.
After 10 years of preparation and a £3bn investment from the UK industry, the ABI said insurers and reinsurers are ready to implement the new regime.
The directive covers more than 3,200 pages of regulatory text, which firms must comply with. More than 400 UK firms are expected to be within scope.
Huw Evans, director general of the ABI, said: “The UK industry has supported the objectives of Solvency II since the beginning and invested significant time and resources to ensure it works as intended for the market.
“With firms now having confirmation about their internal models, the industry is well prepared to transition to Solvency II in January.”
The regime aims to ensure there is a high level of protection for customers buying into general and long-term insurance and savings products.
It is also designed to encourage good risk management, and further increase transparency.
Mr Evans said: “The UK industry has high levels of capitals already, so policyholders can be reassured that they will not notice a difference in the transition.
“The new regime will ensure customers can continue to have confidence in the products they buy, and know their claim or annuity will be paid.”
He said, however, that once the Solvency II regulation has been implemented, time should be given for this change to settle in before any further reform.
“To ensure Solvency II creates a level playing field, and the competitiveness of the UK industry continues, a convergent and consistent approach to these rules is needed across Europe,” Mr Evans added.
Under Solvency II, firms will have to hold enough capital to survive a one-in-200-year stress on their balance sheet.
The ABI has worked closely with policymakers and regulators at the national and European level to ensure the regime works well for the UK market, particularly for annuity products.
katherine.denham@ft.com
