On Nov. 7, UK Treasury issued overseas insurance regime regulations.
UK Treasury published The insurance and reinsurance undertakings (overseas insurance regime, transitional provisions, etc.) regulations 2024 (StIn 2024/1116).
These regulations make a series of technical amendments to secondary legislation relating to the prudential regulation of insurance firms in the UK to ensure that it continues to function following implementation of the solvency II reforms.
Overseas Regime
The overseas regime provided for by this instrument is intended to replicate the scope and effect of existing decisions that grant equivalence to other jurisdictions in relation to reinsurance contracts, group solvency or capital requirements rules.
From Dec. 31, 2024, insurance firms who want to use certain methodologies for calculating capital requirements, or to include certain ancillary forms of capital in their balance sheets, must apply to UK PRA for permission under s.138BA of FSMA 2000.
Section 138BA of the FSMA2000 regulations 2024 (StIn 2024/539) gives UK PRA the power to waive or modify how firms comply with their rules.
Permission to use alternative methodologies to calculate capital requirements, or to include certain forms of ancillary capital in balance sheets, would be granted by exempting firms from complying with certain UK PRA rules via those powers.
This instrument provides that firms who have approval from UK PRA to use alternative methodologies or to include certain ancillary forms of capital immediately before Dec. 31, 2024 under Solvency 2 Regulations 2015, do not have to re-apply from the point at which those regulations are revoked and transferred to UK PRA’s rulebook.
Without this instrument, re-application would take up capacity in insurance firms and UK PRA, which would be costly and time consuming; reapplications would have no practical benefits given firms’ likelihood to be approved under the new wider regime.
The instrument will also introduce a new framework for making overseas recognition decisions for non-UK jurisdictions, and will preserve pre-existing Solvency II overseas recognition decisions assimilated into UK law following EU exit.
The new framework for the overseas insurance regime will allow UK Treasury to make designations recognizing aspects of insurance regulation in relation to reinsurance contracts, group supervision and capital requirement rules in other jurisdictions.
This instrument makes amendments consequential to the revocation of the Solvency 2 Regulations 2015 (StIn 2015/575) to ensure the new regime functions as intended.
Effectiveness
These regulations come into force on Dec. 31, 2024.
From Jan. 1, 2025, if a firm wishes to alter their existing permission or make a new application, they will still have to apply to the UK PRA to do this.
