The UK House of Commons Treasury select committee has produced a report criticising the EU Solvency II Directive and its impact on the UK insurance industry.
Solvency II is a European directive but the UK Prudential Regulation Authority was criticised for having too much regard to the industry’s solvency rather than its competitiveness in the international market.
The Committee also concluded that the PRA should reduce the amount of data required from firms so that the data is not more than is proportionate and necessary for prudential safety.
The Committee complained about the onerous methods used to produce internal financial models saying it is overly time-consuming and inflicts significant costs on those seeking approval. This makes it difficult for insurers with internal models to react to market-turning events in an agile way. It is not only highly costly for insurers to comply but it also stifles competition. The reporting burden absorbs time and resources that could otherwise be better dedicated elsewhere. The PRA provided a response, detailing progress made on the recommendations.
These criticisms apply equally well in South Africa to the enormous burden and cost of current and proposed insurance legislation. It is a pity our parliament blindly approves these excessively onerous and prolix laws.