Loic Bellettre, Partner and EMEIA Capital Leader at EY, comments on Solvency II reforms announced at the Chancellor’s Autumn Statement:
"The Chancellor’s announcement today that HMT will legislate on final Solvency II reforms should help provide much-needed certainty to the insurance industry. The fact that the fundamental spread methodology and calibration is to remain largely unchanged will be a relief for annuity firms particularly, which would otherwise have faced significant increases and volatility in the level of capital required. The fundamental spread will include a more granular split based on rating notches to enable firms to reflect different levels of risk on their portfolio within an asset rating.
“Changes announced to the risk margin will release some capital, and changes to matching adjustment eligibility criteria could, depending on the final detail, increase insurers’ ability to invest in supporting the UK economy. UK insurers will of course need to work through the detail of what’s been announced today and await the PRA’s next steps in order to fully assess all the implications.”