Insurers call on watchdog to defy the EU over new solvency rules

INSURANCE titans are urging the UK regulator to break rank and overhaul “flawed” Solvency II rules without getting the rubber stamp from Europe.

The Association of British Insurers and others have obtained legal advice suggesting that the Prudential Regulation Authority (PRA) can amend key planks of the directive, which came into force last year, unilaterally from the 27 other states.

According to the advice, the PRA has the power to change 23 areas of Solvency II, including the controversial “risk margin” which has been blamed for driving up the cost of annuities.

ABI head of prudential regulation Steven Findlay said: “Legal advice that the industry has sought indicates that some of these flaws could be addressed by how the UK implements the directive, without needing to change the actual European regulations.”

The PRA declined to comment. Chief executive Sam Woods is due to give evidence to Parliament tomorrow on the issue. The debate over Solvency II has been given added impetus by the Government’s hard Brexit policy, leading to calls for the PRA to start acting unilaterally

Julian Adams, head of regulation at insurer Prudential, told Parliament last week the UK “should not be afraid to take action” to have a regime “appropriate for the UK” as Brexit looms. The risk margin, which forces insurers to hold two or three times more capital than necessary, has been criticised by Legal & General chief Nigel Wilson, who blames it for “billions of wasted capital”. @signorbow