Back to all announcements

UK regulators expect political tussles as key Solvency II test begins

LONDON, May 3 (Global Risk Regulator) – With a key second test starting this week of Europe’s Solvency II proposals for making insurance firms safer, Britain’s regulators confirm they expect political wrangles over the treatment of technical provisions under the regime.

“There will be political problems, but we’re hoping they will be resolved satisfactorily,” said Peter Hinton, actuary with the prudential standards division of the Financial Services Authority (FSA), the UK’s integrated financial sector watchdog.

He was responding at the end of last week to questions about how differences between the UK and French approaches to a key aspect of technical provisions – the amounts that insurers have to calculate to ensure they can meet future claims on the insurance policies they’ve issued – might affect the development of Solvency II.

Credit rating agency Standard & Poor’s warned last month that a political storm is brewing over so-called prudential margins in technical provisions that goes to the heart of the way that insurance is regulated in different countries in the European Union.

The strong public positions of the UK and French insurance regulators exemplify the issue, which threatens to derail Solvency II in the absence of political intervention, according to S&P.