LONDON (Reuters) - The Bank of England has proposed easing the burden of European Union capital rules for insurers, but the industry urged the regulator to go further and meet calls from British lawmakers for more radical change.
The BoE’s Prudential Regulation Authority (PRA), which supervises banks and insurers, published a consultation paper to lighten some reporting requirements under the bloc’s Solvency II rules.
The PRA said the proposed changes take into account recommendations for reform made by the Association of British Insurers (ABI), and by parliament’s Treasury Select Committee.
“The PRA believes that these proposals would, in particular, reduce the reporting burden for smaller firms,” the watchdog said in its consultation paper.
Solvency II came into force in January 2016 and was the PRA’s single biggest regulatory task at the time. The ABI has called for several changes and has found backing from UK lawmakers.
The TSC said in a report last October that the BoE and insurers must find common ground over proposed tweaks to keep the 1.9 trillion pound sector in Britain competitive after the UK leaves the EU in 2019.
The PRA is too focused on capital levels and not enough on allowing insurers to compete, the TSC said.
Lawmakers want the PRA to urgently ease the “risk margin”, an add-on capital requirement to cover what a third party would need to safeguard policies if an insurer goes bust.
But PRA Chief Executive Sam Woods has so far resisted making unilateral changes to the risk margin, and hopes that the EU would step in before Brexit to change the risk margin have faded.
Woods is expected to respond to the TSC report when he addresses the ABI’s annual conference on Feb. 27.
The ABI said the PRA’s proposals were a “step in the right direction” after Solvency II increased reporting requirements by four to eight times compared with previous rules.
“There still remains plenty of opportunity for the PRA to go further to ensure our insurance industry is able to fulfil a vital role in helping Britain thrive post-Brexit,” said Steven Findlay, the ABI’s head of prudential regulation.
Reporting by Huw Jones; editing by Mark Heinrich