17 November 2022
The Institute and Faculty of Actuaries (IFoA) welcomes HM Treasury’s consultation response on the reform of Solvency II in the UK. It is important in the public interest that the government’s desire to free up investment under a UK solvency regime is balanced with maintaining appropriate policyholder protection.
Matt Saker, IFoA President, said:
“We support the government’s ambition to remove unnecessary restrictions in the use of the Matching Adjustment. The proposed broadening of eligibility to include ‘highly predictable’ 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.
“We 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’s concerns regarding adding potential volatility to insurers’ balance sheets via an alternative Fundamental Spread methodology.
“In addition, Treasury’s 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.
“Actuaries 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.”
~ENDS~
Sonia Sequeira, Media Relations Manager, IFoA
Tel: (+44)7525 592 198
Email: sonia.sequeira@actuaries.org.uk
1. Response to HMT Review of Solvency II. Institute and Faculty of Actuaries. July 2022.
2. Fundamental Spreads and the Matching Adjustment in light of the HMT review of the Solvency II regime for UK firms. Matching Adjustment Working Party, Institute and Faculty of Actuaries. July 2022.
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