A Treasury Committee report on EU insurance regulation has urged the insurance industry and the PRA "to come to an understanding on what aspects of Solvency II can be changed unilaterally while the UK remains an EU member state".
The committee argue that the UK “may have erred on the side of caution” when putting the regulations in practice. They are particularly critical of the PRA, saying: “An excessively strict interpretation of the requirements of Solvency II, and of its own obligations, has limited [the PRA’s] thinking in a way which could be detrimental to UK plc.”
The Treasury also urged the PRA to give equal weight to its secondary objective which is to ‘facilitate effective competition’.
The report states: "While some differences of opinion are to be expected, the current Committee is as concerned as its predecessor at the extent of disagreement between the PRA and industry on matters that should be relatively factual–for example, around the availability of investment grade long-term assets. Such disagreements do not foster good policymaking."
As a solution, the committee said it would like to see the development of a "clear agreed strategy designed to provide a roadmap" for:
- What changes to insurance regulation can be implemented by the UK authorities now, unilaterally, without the need for a change in the Solvency II Directive,
- What steps the UK regulator would like to see taken to refine the Directive or its applicability to the UK post-Brexit, as a contribution to the Brexit negotiations,
- What action can be taken post-Brexit to foster innovation, competition and competitiveness for the benefit of UK consumers and the standing of the UK’s place in the international insurance industry.
The committee asked for a progress report from the PRA by the end of March.