General Insurance Article - Report and response to Solvency II post Brexit reforms

 A key Government objective in reforming Solvency II includes the ambition to support insurance firms to “provide long-term capital to support growth, including investment in infrastructure.”

 However, WTW analysis shows that:

 • The current reform proposals would not realise the opportunity to release more capital for investment.

 • For the majority of annuity writers, the proposals would result in lower available capital and not provide the types of release indicated to meet HMT’s Solvency II review objectives.

 • Despite the key Government objective of reforming Solvency II to release more capital for investment, a 60-70% reduction in the Risk Margin combined with the proposed significant reduction to the Matching Adjustment benefit, more capital would be required for firms focused on writing material volumes of bulk purchase annuity business.

 Anthony Plotnek, Director at WTW and Co-Author of the Report: “It is detrimental to the UK economy and future policyholders to have overly prudent protection for existing policyholders as this will drive up future prices, likely increase the use of overseas reinsurance and reduce the capital for UK Government climate change and mean lesds investment in productive assets."

 “A more balanced package of reforms is required to avoid significant change to the level and volatility of the Matching Adjustment and result in a less polarised outcome for different types of insurers."
  

 WTW Response to Solvency II Consultation