Insurance experts have backed Prudential Regulation Authority chief executive Andrew Bailey’s attack on the “staggering” costs of Solvency II and the “shocking” EU regulatory process.
In a letter written in February and published this week, Bailey wrote to parliamentary commission on banking standards chair Andrew Tyrie claimingthe directive has become “lost in detail and vastly expensive” and will cost the industry billions of pounds to implement.
The Solvency II process began 10 years ago and will introduce EU-wide prudential regulation for insurance firms with higher capital and risk controls.
Bailey estimates consumers will see price rises of 0.1 per cent, insurance firms will see ongoing costs of £200m a year, on top of £400m spent since 2008, while the regulator is set to spend between £5m and £7m a year.
The Treasury select committee is planning to investigate Solvency II after Bailey called for a parliamentary inquiry.
Royal London head of corporate affairs Gareth Evans says: “It is an amazing letter and change in tack from the regulator. Solvency II has been overly prolonged with an enormous cost to firms that will ultimately be borne by consumers so we need answers.”
Eversheds partner Michael Wainwright says: “The delays and lack of preparation that have dogged Solvency II suggest it could become hopelessly out of date and unfit for purpose. The UK regulators should do whatever is necessary to preserve confidence in the insurance market.”
Zurich UK Life principal of Government and industry affairs Matthew Connell says: “Solvency II should be reviewed and lessons learned but it should be constructive and not in an atmosphere of recrimination.”