“EU regulation doesn’t work for us anymore and the government is determined to fix that by tailoring the prudential regulation of insurers to our unique circumstances,” he said at the event, adding that policyholder protection will remain a top priority.
Read more: UK reveals plans to overhaul Solvency II
The ABI said that changes to the risk margin, matching adjustment, and reducing reporting requirement were its top priorities to unlock £95 billion in capital, Reuters reported.
According to Glen, a more flexible UK regime will replace the EU-focused Solvency II rules, with a full consultation document, which will include all three steps the ABI listed, to be released in April, followed by a more detailed technical consultation by the Bank of England later in the year.
“We have a genuine opportunity to maintain and grow an innovative and vibrant insurance sector, while protecting policyholders and making it easier for insurance firms to use long-term capital to unlock growth,” he said.
Read more: WTW publishes ABI-commissioned report on Solvency II reforms
Glen added that the proposals would include a significant reduction in risk margin – as much as 60% to 70% for long-term life insurers.
UK Treasury also proposed a “more sensitive treatment of credit risk in the matching adjustment” and “significant increase” in flexibility to allow insurers to invest in long-term assets such as infrastructure. The changes will include “a meaningful reduction” in reporting and administrative burden on firms as well.
“This announcement is a positive step that sees us well on the way to ensuring that we have a package that provides additional investment in the UK, without undermining the high standards of policyholder protection we have,” Charlotte Clark, director of regulation at the ABI, told Reuters.
The EU has also proposed a draft law to reform Solvency II, which it said could release €90 billion (around £75 billion) of capital in the short term, followed by about a third of this amount annually in the long term.