For life insurers in the UK, the risk margin is one of the most controversial aspects of the Solvency II regime. Following its implementation, the risk margin came under considerable criticism for being too large and too sensitive to interest rate movements. These criticisms are particularly valid for annuity business – such business is of great significance to the national system for retirement provision. This criticism has led to political interest, and the risk margin was a major element of the Treasury Committee inquiry into Solvency II.
The working party was set up in response to this criticism. Our brief is to consider both the overall purpose of the risk margin for life insurers and solutions to the current problems, having regard to the possibility of post-Brexit flexibility. We have concluded that a risk margin in some form is necessary, although its size depends on the level of security desired.
Contact Niki Park for more information.
020 7632 2152
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