Big-name UK insurers win Bank of England approval under new rules

Nineteen insurance companies have won Bank of England approval for plans to shield themselves against financial shocks under the industry’s new, Europe-wide Solvency II rules.

Aviva, Prudential, Standard Life and Legal & General are among the FTSE 100 firms to get approval for heir “internal models”, allowing them to use their own methods of calculating risks within the business to set up capital buffers. The BoE has not revealed which insurers have won full approval and which have only seen part of their business waved through.

Andrew Bailey, head of the BoE’s Prudential Regulation Authority (PRA), said the approvals marked a “major milestone in the implementation of Solvency II in the UK”, which comes into force on January 1 after more than a decade of planning.

“Going forward we will monitor insurers’ models carefully in order to ensure they continue to deliver an appropriate level of capital.”

Like the ‘Basel’ capital rules for the banks, Solvency II requires all big European insurers to hold sufficient assets on hand to ensure they can keep paying out should the financial system totter again as it did in 2008/9.

Efforts to set up a unified set of rules have been grinding on for more than 10 years. A replacement for Solvency I was formally created in an EU directive in 2009, only for the financial crisis to send planners back to drawing boards across the continent.

The BoE’s Paul Fisher said almost a year ago that the industry appeared well-prepared and the regulator did not expect a big rush to raise additional funds. UK-based insurers are already expected to hold relatively high levels of capital, meaning the switch to Solvency II could be less painful than elsewhere.

Dutch insurer Delta Lloyd last week announced a €1 billion rights ahead of the rule change. Meanwhile, French insurer Axa said that it will raise its dividend target, having comfortably met Solvency II requirements.

Meanwhile, German industry goliaths Munich Re and Allianz have said their internal models have been approved by the local regulator.

The full list of firms which got full or part approval from the Bank of England is:

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.

Original publication of this article: http://news.markets/shares/big-name-insurters-get-boe-green-light-under-solvency-ii-6217/