The Association of British Insurers (ABI) has claimed the the UK industry is well prepared for what it says is the biggest reform to capital rules in a generation.
After decade in preparation and a £3bn investment from the UK industry, insurers and reinsurers are ready to implement the new regime from 1 January 2016.
Solvency II is a European wide regulation, which specifies the levels of capital that insurance companies must hold. It should encourage good risk management, and further increase transparency and disclosure. Solvency II is designed to increase confidence for customers when buying insurance.
The regime is aimed to ensure a high level of protection for customers, for both general and long term insurance and savings products, regardless of the company they buy their insurance from.
Over 400 UK firms are expected to be within scope, while 19 UK firms received approval from the Bank of England to use their own internal model to calculate their capital requirements, three times more than any other EU state. More UK firms will be using internal models as part of insurance groups based elsewhere in the EU.
Under Solvency II, firms will have to hold enough capital to survive a one in 200 year stress on their balance sheet.
Customers will not notice any difference with their existing insurance or when buying new products. The UK industry currently holds high levels of capital, and this will continue under the new regime.
Huw Evans, the ABI’s director general, 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 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.
“As we move to Solvency II, time should now 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.”