PRA approves Solvency II models for 19 insurers

The firms include Aviva, Just Retirement, Legal & General Group, Prudential, Scottish Widows, and Standard Life.

Solvency II is an EU Directive which aims to introduce a new, harmonised insurance regulatory regime aimed at promoting policyholder protection and creating a more resilient sector.

Under Solvency II, an insurer can apply for use of an internal model in order to calculate the amount of capital it needs to hold, in recognition of the risks it faces. Insurers that do not use an internal model will have their capital requirements set using the standard formula, which is appropriate for the majority of insurers.

The PRA said that a number of insurers are planning to apply for model approval later than 1 January 2016 after developing internal models to the standards required by the Directive.

Andrew Bailey, Deputy Governor, Prudential Regulation, Bank of England and CEO of the PRA, said:

“Today marks a major milestone in the implementation of Solvency II in the UK. The PRA has approved 19 insurers’ internal models for use from day one of the new regime. Going forward we will monitor insurers’ models carefully in order to ensure they continue to deliver an appropriate level of capital.”