Prudential Plc, Aviva Plc and Legal & General Group Plc are among large U.K. insurers to win Bank of England approval of the models they use to calculate capital requirements under the European Union law known as Solvency II.
The BOE’s Prudential Regulation Authority approved 19 full or partial internal models submitted by insurers, the regulator said in a statement on Saturday. As many as 450 firms in the U.K. may be affected by the rules when they come into force across the EU on Jan. 1, with the remainder using a standard formula to assess risk under the law.
The companies and entities whose internal models were approved also include Standard Life Plc, Phoenix Group Holdings Plc, Just Retirement Group Plc, Amlin Plc, Pension Insurance Corp., Lloyds Banking Group Plc’s Scottish Widows Group, RSA Insurance Group Plc and Lloyd’s of London Ltd.
The BOE has been working with insurers to help them adapt to the new regulations, which set stricter capital standards designed to boost resilience in a downturn. Solvency II updates EU insurance rules that showed “structural weaknesses” over the 40 years of their existence, according to the European Commission, the EU’s executive arm. Among those was a “simplistic model” that didn’t yield accurate risk assessments.
The new rules set standards for authorization of internal models used to calculate the solvency capital requirement.
Direct Line Group Plc opted to use the standard formula starting in January, but will seek approval for its internal model in 2016. Other insurers including St James’s Place Plc, Admiral Group Plc and Partnership Assurance Group Plc have also opted to use the standard formula.
Most insurers are expected to disclose their Solvency II capital requirements when they report full-year earnings next year.
The other insurers to get approval Saturday were Aspen Insurance UK Ltd., British Gas Insurance Ltd., Markel International Insurance Company Ltd, MBIA UK Insurance Ltd, The National Farmers’ Union Mutual Insurance Society Ltd., Pacific Life Re Ltd., QBE European Operations Plc and Unum European Holding Company Ltd.