International Insurers expect few issues following Brexit

Separate reviews of capital requirements for insurers in the European Union and the UK are likely to result in a similar set of rules for cross-border firms, insurers said Tuesday. Since the EU introduced the capital rules in 2016, markets have moved further, with central banks pushing interest rates into negative territory to fight the coronavirus pandemic. The European Commission will propose draft amendments to the rules and their implementing measures next summer, said the head of the EU insurance executive, Didier Millerot, at an online event organized by the Insurance Europe industry association. In the UK, some insurers and lawmakers are looking to scale back Solvency II, which was introduced into UK law as part of Brexit preparations, and the Bank of England has signaled that there will be at least some changes. The UK will no longer be bound by EU rules after December 31, when the post-Brexit transitional arrangements expire, but Olav Jones, deputy director general of Insurance Europe, said the UK will seek changes similar to the ones it made the EU Insurers want to make. "They have a similar market. By and large, we have the same business models, the same challenges, and we are striving for the same improvements in Solvency II," said Jones. Alban de Mailly Nesle, group chief risk and investment officer at French insurer Axa, which operates in London, said he expected the bloc and the UK to have "relatively similar" regulation going forward. Greater divergences could make UK access to the EU insurance market more difficult in the future. Solvency II does not allow for a prolonged period of negative interest rates and the current cost of capital should change to reflect such interest rates is now a reality in the euro area, Insurance Europe said. The trade panel said EU insurance regulator EIOPA's had gone too far in its view of how low interest rates could go. "The floor that EIOPA is proposing is way too low and negative," said Jones. "We recognize that this needs to be addressed, but we have some different views on exactly how this should be done.