Charlotte Gerken: Competitiveness and productive investment - what parts do they play in the reform of insurance regulation?
Speech (virtual) by Ms Charlotte Gerken, Executive Director of Insurance Supervision of the Bank of England, at the JP Morgan European Insurance Conference, 14 June 2022.
The views expressed in this speech are those of the speaker and not the view of the BIS.
Accompanying slides
Thank you for your introduction and for inviting me to this conference.
Since the Government announced the Solvency II review, there has been much emphasis on the desirability of reform to enhance the insurance sector's competitiveness and its capacity to make productive investment. Today I would like to outline how competitiveness and productive investment relate to the Prudential Regulation Authority's (PRA) approach to the review by focussing on three areas:
- Investment flexibility
- The valuation of liabilities
- Process improvements
To put the review in context, though: the core framework underlying the Solvency II regime and its principles are broadly fit for purpose, and are in line with existing and emerging international standards. The review does not involve tearing it up and starting again – not least because of the substantial sums invested by industry in the last decade in adopting it. Industry responses to HM Treasury's Call for Evidence were largely in agreement with this approach.
However, the review does give an opportunity we are seizing, to deal with those areas of Solvency II that we know are not working as well as they could. Sam Woods and I have both previously discussed the PRA's concerns relating to the current regime. Taken together, the improvements we want to make represent an important set of reforms and can achieve the objectives of the review.