(Adds more detail)
By Huw Jones
LONDON, Feb 20 (Reuters) - The Bank of England sought on
Monday to allay fears among insurers that it was dragging its
feet over a long-trailed and disputed reform of their capital
rules, saying a "very good sense" of the changes would emerge
well before December.
Changing the rules, known as Solvency II, has become a test
of how far Britain is ready to change regulations inherited from
the bloc to boost the financial sector.
The industry has long called for a speedy reform to unlock
billions of pounds from capital buffers to invest in
infrastructure and boost the sector's global competitiveness.
Insurers point out there have been, however, no major
changes despite Britain having left the EU's legal orbit more
than two years ago, and regulators being given a new remit to
buttress growth and the financial sector's competitiveness.
In the meantime, the EU is much further down the road in
updating Solvency II.
The BoE has clashed with the sector and the finance ministry
over how far to ease the rules, citing the need to protect
policyholders.
On Monday BoE Deputy Governor Sam Woods, who heads banking
and insurance regulation, sought to ease frustration over the
pace of change.
"Discussions with colleagues in the Treasury about precise
timings are ongoing, but at this point our broad expectation is
that we will publish a first consultation on some of the topics
above in June, followed by a second consultation ... in
September," Woods told the Association of British Insurers
annual dinner.
"We are also mindful that for some changes, firms will need
advance notice to prepare, but we expect that these
consultations will give firms a good sense of how the detailed
regime will operate," Woods said, adding firms will have a "very
good sense" of the changes well before the end of 2023 to adapt
investment plans.
If parliament supports the government's plan for a large cut
to the risk margin of insurers, then the Bank would "move on
from the debate and into implementation", Woods said, referring
to a mandatory buffer to help move a failing insurers' policies
to another insurer.
The Bank would not use new powers to "reverse engineer"
disputed changes to the so-called 'fundamental spread' or
discount on how much insurers can cut capital requirements.
"Let me say very clearly and simply that we will not do
this," Woods said.
(Reporting by Huw Jones;
Editing by Mark Heinrich and Alison Williams)
Messaging: huw.jones.thomsonreuters.com@reuters.net))
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