Bank of England consults on next leg of insurance capital reforms

The Bank of England on Thursday proposed further reforms to capital rules for insurers in a step it said would cut red tape without lowering solvency standards.

The Solvency II rules were inherited from the European Union and their reform is seen by the insurance industry and by lawmakers who supported Britain’s exit from the bloc as a key “Brexit dividend” to unlock billions of pounds to invest in infrastructure.

Changes to major elements of the rules – focused on how far to ease capital requirements – are already due to come into effect this year and in 2024, following protracted negotiations between the Bank and the finance ministry.

The Bank set out on Thursday additional changes that it said were designed to further streamline reporting by insurers to regulators, and removing smaller insurers from the scope of the rules.

“These measures will reduce bureaucracy, facilitate competition, and support UK economic growth and competitiveness without lowering prudential standards or weakening policyholder protection,” Sam Woods, chief executive of the BoE’s Prudential (LON:PRU) Regulation Authority arm, said in a statement.

The latest reforms also introduce a “mobilisation” regime to allow newly authorised insurers more flexibility as they set up in Britain, the BoE said, in a bid to increase its attractiveness as a global financial centre and helping to increase competition.