Nineteen UK insurance companies have been given the greenlight to use a full or partial internal model for Solvency II by the UK’s insurance supervisor. The PRA said the announcement marks a significant step forward for the UK insurance industry in preparing for the arrival of the Solvency II regime on January 1 2016.
The list includes Lloyd’s as well as individual London market companies Amlin, Aspen, Markel International, QBE European and RSA Insurance.
Andrew Bailey (pictured) , deputy governor, Prudential Regulation, Bank of England and CEO of the PRA, said in a statement that the announcement marks a major milestone in the implementation of Solvency II in the UK. “The PRA has approved 19 insurers’ internal models for use from day one of the new regime. Going forward we will monitor insurers’ models carefully in order to ensure they continue to deliver an appropriate level of capital.”
From 2016, as in other European markets insurers in the UK have to operate under the new Solvency II regulatory regime.
Under Solvency II, an insurer can apply to use an internal model in order to calculate the amount of capital it needs to hold, in recognition of the risks it faces. Insurers that do not use an internal model will have their capital requirements set using the standard formula, which is appropriate for the majority of insurers.
Many companies originally set out to develop a full internal model to use from the start of Solvency II but were unable to make the deadline. However, UK insurers are thought to be ahead of most other European markets in terms of the number obtaining approval to use internal models, partly because regulators in many other markets have been unequal to the task.
A number of UK insurers are planning to apply for model approval later than January 1 2016. These insurers are continuing to develop internal models to the standards required by the Directive, and are expected to apply for approval in due course, the PRA said.
The PRA has not disclosed where an insurer’s application to use an internal model has been either rejected or withdrawn.
The PRA said it cooperated with colleges of supervisors and reached joint decisions where applicable. Communication of joint decisions rests with the group supervisor, and therefore decisions for firms where the PRA is not the group supervisor are not included here. The PRA noted that other national supervisory authorities have already communicated some of these decisions.
The full list of UK insurers gaining approval for their full or partial models is as follows:
Amlin Plc · Aspen Insurance UK Ltd · Aviva Plc · British Gas Insurance Ltd · Just Retirement Ltd · Legal & General Group Plc · Markel International Insurance Company Ltd · MBIA UK Insurance Ltd · The National Farmers’ Union Mutual Insurance Society Ltd · Pacific Life Re Ltd · Pension Insurance Corporation Plc · Phoenix Group · Prudential Plc · QBE European Operations Plc · RSA Insurance Group Plc · Scottish Widows Group · Society of Lloyd’s · Standard Life Plc · Unum European Holding Company Ltd.