Recommendation 22

HM Government Acknowledged

The government notes this recommendation. The reform of Solvency II aims to ensure deliver a robust insurance regulatory regime that is tailored to the needs of the UK insurance sector and will be guided by the government’s objectives to: • spur a vibrant, innovative, and internationally competitive insurance sector; • protect policyholders and ensure the safety and soundness of firms; and • support insurance firms to provide long-term capital to support growth, including investment in infrastructure, venture capital and growth equity, and other long-term productive assets, as well as investment consistent with the government’s climate change objectives. On 21 February 2022, the government announced major reforms to Solvency II. These include: • a substantial reduction in the risk margin of around 60–70% for long-term life insurers; • a reassessment of the fundamental spread used in the calculation of the matching adjustment; • the introduction of a significant increase in flexibility to allow more investment in long-term assets; and • a major reduction in the EU-derived regulations which make up the current reporting and administrative burden. The government’s consultation on proposed reforms to Solvency II closed on 21 July 2022. The government is reviewing the responses and will respond in due course, consistent with its objectives.