Thresholds [UK]
Background
The UK government carried out a review of the Solvency II regime between October 2020 and November 2022[1]. The reforms proposed by the government included a proposal to increase the thresholds originally prescribed by the Solvency II Directive at which small insurers are required to become regulated under the Solvency II Regime. Insurers who do not meet the threshold levels operate instead under the non-Directive firm sector rules. These rules contain simpler regulatory requirements, including simpler capital standards, reporting forms and governance requirements.
The Prudential Regulation Authority (PRA) consulted on the proposals to increase the threshold levels and to redenominate monetary values from EUR to GBP in CP12/23 (Review of Solvency II: Adapting to the UK insurance market). Following responses to the original proposals the PRA decided to further increase the threshold amounts and final policy and rules are set out in PS2/24. Accordingly, changes to the thresholds are:
- a firm’s gross written premium income – changed from EUR 5 million to £25 million (increased from the £15 million threshold proposed in CP12/23).
- firm and group technical provisions – changed from EUR 25 million to £50 million.
New and existing insurers who do not exceeded the thresholds may, if they wish, continue to apply for a voluntary requirement to operate within the Solvency II regime.
The amended threshold provisions set out in the Insurance General Application Part 2.3 of the PRA Rulebook took effect from 31 December 2024.
[1] The government published its Call for Evidence in October 2020 and it’s response in July 2021. This was followed by the government’s consultation in April 2022 and its response in November 2022.