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Brexit and Solvency II: The Story So Far

In the light of last June’s Brexit vote, the UK Treasury Select Committee (TSC) opened an inquiry into the operation of Solvency II (SII) in the UK. The inquiry wanted to understand the strengths and weaknesses of SII in its existing form, together with exploring the options open to the UK insurance industry following the Brexit vote. 

The inquiry was – and remains - a real opportunity for the IFoA to influence this debate. We submitted a comprehensive written response on 11 November; a copy of it can be found here: IFoA response. A number of Practice Boards were heavily involved in putting it together, including the Life and General Insurance Boards, as well as the Retrospective on Solvency II Working Party, amongst others. Our thanks go to all the Boards, Committees, Working Parties and individual members who contributed to this important debate. 

The TSC published a number of the written responses they received, and we have produced a summary of a selection of these responses. Note that the summary is based on our own interpretation of these written submissions: IFoA Summary

IFoA Oral Evidence

Following our written evidence, the TSC invited the IFoA to provide supplementary oral evidence. Andrew Chamberlain, Chair of the Life Board, gave evidence on behalf of the IFoA on 17 January, together with representatives from PWC and KPMG. 

Themes explored by the TSC at this meeting included the suitability of SII for the UK market, whether the PRA should have competition as a primary objective, and the wider impact of measures such as the Matching and Volatility Adjustments and the Risk Margin.  Our evidence focussed on the impact of SII from a public interest perspective, including the balance between policyholder security and policyholder value for money. The meeting went well and the TSC were left with a clear idea of some of the impacts of SII and potential solutions to address them. A video of this session can be found here – IFoA/TSC video - and the corresponding IFoA/ TSC transcript. 

We followed-up on our appearance with a brief letter summarising some of the issues/ potential changes which could be made to SII in the UK: Summary of SII Changes.  

The TSC had a subsequent session with further respondents on 25 January, and the corresponding video / transcript can be found here: 25 Jan video25 Jan transcript.

TSC Sessional Event

The week after our attendance at the TSC, we held the first ever dual-site live sessional event in the IFoA’s history. The event drew together IFoA working parties at Staple Inn and Edinburgh on 23 January, and featured a live video feed between both sites and on-site presentation and discussion. 

The sessional meeting started with a debrief from Andrew Chamberlain on our evidence to the TSC, including the wider context to the Committee.  There then followed updates from two Working Parties relevant to the themes of the TSC inquiry (Retrospective on Solvency II and Transitional Measure on Technical Provisions). The event closed with a Q&A session live from both sites.

The meeting was a success, and the IFoA hopes to replicate this dual-site model in the future. Our thanks go to Andrew Chamberlain, the two sessional Chairs and both Working Parties for presenting on the night. A video of the sessional meeting will be added to this site when available. 

Next Steps

The TSC is a particularly influential committee, and Government departments, notably HM Treasury, are likely to consider carefully what the TSC have to say. We will be monitoring developments with the TSC carefully, and hope to have further IFoA input on the ongoing evolution of insurance regulation in the UK.

We will update this page as the debate progress. 

Resources
Title Date
IFoA summary and analysis - TSC Solvency II Inquiry 31 January 2017
IInsurance industry evidence to the Treasury Select Committee Solvency II Inquiry: 25 January 2017
Summary of Solvency II changes 17 January 2017
IFoA evidence to the Treasury Select Committee Solvency II Inquiry: 17 January 2017
IFoA response to TSC Solvency II Inquiry 11 November 2016

Contact Details

Policy Team

policy@actuaries.org.uk

IFoA, 7th Floor, Holborn Gate, 326 – 330 High Holborn, WC1V 7PP