New details of the Solvency UK package (SUK) have been shared by the PRA at the ABI dinner.
Details of the UK-specific Solvency II package, known as Solvency UK (SUK), have been shared this week.
The UK government does not plan to make major changes to the Fundamental Spread and will leave it “largely as it is” while going ahead with a large cut to the risk margin and the rest of the reforms.
The rest of the SUK package focuses on competitiveness and growth. Key elements include:
- Cutting unnecessary reporting requirements for the UK market. Reporting has been cut by 40% for small and medium-sized firms to increase proportionality.
- Streamlining the rules for internal model approvals, removing 70% of the 200 internal model tests and standards.
- Widening the range of assets eligible for the Matching Adjustment and finding the best way to implement the widening of eligibility requirements to include assets with highly predictable cash flows.
- Raising the threshold at which smaller and newer firms are required to enter the SUK regime and introducing a mobilisation regime to lower barriers to entry for new firms.
- Removing capital requirements for branches of international insurers operating in the UK, reducing barriers to entry and enhancing the international competitiveness of the UK market.
- Taking steps to clarify expectations around the UK ISPV regime to allow new ways of raising capital and make it easier for firms to participate in the market.
If Parliament agrees to the SUK package, the reforms can progress from the debating phase to implementation.
The PRA will consult with the UK Treasury on a set of rules consistent with the legislation, and publish them as quickly as possible. They are also working with Subject Expert Groups to ensure major technical issues are found and addressed early.
Reforms will be implemented in stages rather than in a ‘big bang’ on a specific date. The first consultation is set to published in early June 2023 and the second in September. These consultations will give firms a good sense of the new regime and allow them to start to prepare accordingly.
Find out more here.
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