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Solvency II reform welcomed by insurance and long-term savings industry

The Chancellor has today confirmed plans to reform the prudential regulatory regime for the UK insurance and long-term savings sector.

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Hannah Gurga, ABI Director General, said:

We strongly welcome these changes to the Solvency II regime which will allow the UK insurance and long-term savings sector to play an even greater role in supporting the levelling up agenda and the transition to Net Zero.

Meaningful reform of the rules creates the potential for the industry to invest over £100bn in the next ten years in productive finance, such as UK social infrastructure and green energy supply, whilst ensuring very high levels of protection for policyholders remain in place.

More broadly, it will encourage a thriving and competitive industry which will ultimately benefit the UK economy, the environment and customers. This meets the objectives that HM Treasury set out to achieve and which the industry has supported throughout.



Barry O’Dwyer, ABI President and Royal London Group CEO, said:

We all want to see an insurance sector that maintains the highest standards of policyholder protection and also contributes significant investment into UK assets and infrastructure that will benefit our customers, the environment and wider society. This has always been our goal and with these proposed reforms, we can achieve that ambition. The industry will continue to work closely with the Government, the Prudential Regulation Authority and other stakeholders as we move towards implementing the changes.


In particular, the ABI welcomes the following aspects of the reform:

We welcome the proposed reduction to the Risk Margin by 65% for life insurers and 30% for non-life insurers. We agreed with the Prudential Regulation Authority’s view that the Risk Margin was too large and sensitive to interest rates and consider that the changes proposed address both these issues.

We are pleased to see proposals to broaden the asset and liability eligibility criteria for the Matching Adjustment. This would allow industry to invest in a wider array of assets and also enable relevant insurers to include morbidity liabilities in Matching Adjustment portfolios.

We support the Government’s announcement that the design and calibration of the fundamental spread will remain as it is today. This will lead to less volatile annuity prices and ultimately provide a more stable income for UK pensioners.

Policyholder protection is of the utmost importance for our industry and we will work closely with the PRA on implementing the rules and the use of any supporting supervisory tools.

Further information
ABI Press Office

Last updated 17/11/2022