The UK Parliament’s Treasury Committee recently issued “Terms of Reference” providing the structure for its inquiry into Solvency II, including the amount of capital insurers must maintain to reduce their risk of insolvency, and the regulation of the UK insurance industry post-Brexit. The Terms of Reference described the options available to the UK for its future relationship with the EU and the potential impact for insurance. According to the Terms of Reference, these options include but are not limited to: (a) remaining in the European Economic Area (“EEA”) with the retention of Solvency II and adopting as domestic legislation any changes to it that are subsequently agreed by the EU; (b) leaving the EEA but seeking to retain passporting rights for financial services, which would also result in the retention of Solvency II and implementing any subsequent changes into domestic legislation; (c) sever all connections with the EU/EEA, releasing itself from adherence to EU law, but retaining UK legislation which has implemented EU directives such that Solvency II is maintained as of the date of Brexit but any subsequent amendments to the directive would not be incorporated or adopted; and (d) sever all connections with the EU/EEA and repeal all legislation which derives from EU law, replacing it with domestic legislation where the UK Parliament deems it to be desirable, which would mean that the UK could revert to prior standards or even select the more desirable elements of the Solvency II regime.
According to the Terms of Reference, the committee will also be examining the effectiveness and implications for the Solvency II standards. The publication does not reference any deadline for the completion of the Committee’s review. A copy of the Treasury Committee’s Terms of Reference can be found here.