The Bank of England will not ‘go soft’ on enforcing European Union capital rules for insurers, although it will look at ways to make it easier for new entrants to boost competition in the industry, its deputy governor Sam Woods said on Tuesday.
The BoE's Prudential Regulation Authority, which Woods also heads, is consulting on how to ease the burden of the EU's Solvency II rules, which insurers say are overly burdensome.
British lawmakers have heavily criticised the BoE for not easing up on EU capital rules, which in some cases are forcing business to shift overseas to avoid heavy capital charges.
Woods said he was willing to make some changes, but would not be rushed into making any big alterations.
‘We can tell the difference between feedback about a genuine technical flaw and generalised lobbying for lighter-touch regulation,’ Woods told the annual conference of the Association of British Insurers.
And the industry should not lose sight of the policyholder, who has been saddled with past failures like Equitable Life.
There is ‘no convincing evidence’ to show that the EU rules had crushed profitability or growth of British insurers, or driven up premiums for policyholders, Wood said, although implementation of the directive could work better.
The PRA is exploring how to make it easier for new insurers to get a licence in a bid to boost competition, he said.
Woods was emphasising how the PRA could change the way it enforces some of the Solvency II rules, rather than changing the rules themselves, a step that could trigger opposition from other regulators in the bloc.
Britain is leaving the EU next year, with trading terms uncertain for financial firms who may have to rely on a system of ‘equivalence’ for access to the bloc's market.
Actually changing the substance of EU rules could make it harder for Britain to argue equivalence, an insurance regulator from elsewhere in the EU told Reuters.