Nigel Wilson, CEO of British insurer Legal & General, said on Tuesday he backed potential changes to the way the industry is regulated after Britain’s Brexit transition period with the European Union ends in December.
Wilson told the Reuters Events Future of Insurance Europe conference he supported a Bank of England review into the EU’s so-called Solvency II capital rules currently in operation, including potentially expanding the range of assets insurers could hold.
“There’s a good positive feeling that actually giving us access, and the right to invest, in lots of different and new asset classes is a much better solution than… buying old asset classes,” Wilson said.
Solvency II is an EU law that dictates the amount of capital an insurer must hold against its asset portfolio to ensure it has enough protection against insolvency, with liquid assets treated more favourably than illiquid ones like infrastructure.
Wilson said other parts of the current EU Solvency II regime were “overly technical” and could be “moderated” whilst still reaching the same or better outcome, and would not be “capital arbitrage or regulatory arbitrage”.
“This is just giving us less requirement to do excessive structuring, which I think we and the regulators would agree is the right thing to do.”
Wilson also said the “very bizarre” rules around the so-called risk margin could comfortably be changed.
The rules had required some companies to hold more capital than peers in other countries, he said.
The risk margin refers to the potential cost for a failing insurer to transfer its policies to a third party and does not cover actual expected claims.