The committee said in a statement on September 13 that it has agreed terms of reference for an enquiry into Solvency II, an EU-wide insurance regulatory scheme. The enquiry will assess the options for the UK insurance industry thrown up by the decision to leave the EU.
The committee’s chairman, Andrew Tyrie, said there are “manifest shortcomings” in the Solvency II directive, which came into force in January, and that the industry had expressed “a heap of concerns” during its formulation. Tyrie said: “Brexit provides an opportunity for the UK to assume greater control of insurance regulation.”
He added the prospect of leaving the EU affords the UK a chance to look again at aspects of the regulation.
“The Treasury Committee will now take a look at the Brexit inheritance on insurance to see what improvements can be made in the interests of the consumer,” Tyrie said.
A spokesman for the Association of British Insurers gave a lukewarm reaction to the inquiry. He said his members spent years working on Solvency II. But he stressed that few had expected the Brexit result, but the ABI would welcome pertinent questions from the enquiry.
While many leading City institutions and big banks backed the UK remaining in the EU during the referendum campaign, others have pointed to the fact the Brexit vote could allow Britain to free itself from some of the EU’s more cumbersome legislation on the City.
However, Solvency II is likely to continue to impact the UK’s insurance industry even after the country leaves the EU, particularly if the UK negotiates access to the single market or the much coveted European financial passport, which allows firms based in London to sell products into other EU member states.
A senior figure at a City of London insurance company said: “I don’t know why they’re doing it. The cost of Solvency II was huge for insurance companies to implement, and if we are looking at equivalence with continental Europe, there’s no way we could move away from it.”
• Liz Pfeuti and Mike Foster contributed to this article, which also appeared on WSJ City, a made-for-mobile app that combines the best of the Wall Street Journal and Financial News, tailored for an audience in the City of London. Download here