The UK Government has launched its long-awaited consultation on proposed reforms to the Solvency II regime in the UK. Since leaving the European Union, the UK Government is now able to adapt its version of the Solvency II regime to more closely suit the UK insurance market. The UK Government believes that if certain changes are introduced, life insurance companies might be able to release up to 15 per cent of capital.

The proposals focus on the following four changes:

  • a substantial reduction in the risk margin of around 60-70% for long-term life insurers;
  • a reassessment of the fundamental spread used in the calculation of the matching adjustment;
  • the introduction of a significant increase in flexibility to allow more investment in long-term assets; and
  • a major reduction in the EU-derived regulations which make up the current reporting and administrative burden.

Responses to the consultation questions should be submitted to HM Treasury by 21 July 2022.

View: UK government launches consultation on Solvency II

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