17 November 2022
The 桃子视频 (IFoA) welcomes HM Treasury鈥檚 consultation response on the reform of Solvency II in the UK. It is important in the public interest that the government鈥檚 desire to free up investment under a UK solvency regime is balanced with maintaining appropriate policyholder protection.
Matt Saker, IFoA President, said:
鈥淲e support the government鈥檚 ambition to remove unnecessary restrictions in the use of the Matching Adjustment. The proposed broadening of eligibility to include 鈥榟ighly predictable鈥� cashflows is pragmatic and should help provide insurers with a greater range of investment opportunities. There are both societal and environmental benefits to increased investment in appropriate long-term productive finance.
鈥淲e are also encouraged by proposals in relation to one area of particular industry debate and interest: the calibration of the Fundamental Spread methodology. We are pleased to note the proposed evolution of the current Fundamental Spread, including the introduction of notched allowances within credit ratings which we suggested in our recent Fundamental Spread research and consultation response. We shared the Treasury鈥檚 concerns regarding adding potential volatility to insurers鈥� balance sheets via an alternative Fundamental Spread methodology.
鈥淚n addition, Treasury鈥檚 proposals for a range of tailored reforms of the risk margin are welcome and are consistent with the suggestions in our recent consultation response. In a similar vein, we are also encouraged by the proposals to streamline regulatory reporting, which should not impinge on supervisory standards.
鈥淎ctuaries are experts in this specific and highly technical area and the profession has an important role to play in the future evolution of Solvency II. We look forward to engaging with Treasury and the Prudential Regulation authority to this end. More broadly, we are keen to work with government and the wider insurance sector to understand how to help maximise opportunities in long-term productive finance.鈥�