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Insurers told no softening of EU insurance rule due to Brexit uncertainty

Insurers hoping that a European insurance rule might be softened after Brexit have had their hopes dashed by the Bank of England, amid ongoing uncertainty. 
MPs and the Association of British  Insurers (ABI) have been lobbying for part of the so-called Solvency II capital rules, which came into force in 2016, to change following concerns that the rules are too rigid.    
But Bank of England deputy governor Sam Woods told MPs that "in the context of the ongoing uncertainty about our future relationship with the EU in relation to financial services we do not yet see a durable way to implement a change with sufficient certainty". 
The message follows months of weighing up changes to the so-called risk margin, a key part of the rules which require firms to hold extra capital. Insurers complain that the amount they are asked to put aside is too large. 
The BoE's Prudential Regulation Authority (PRA) has previously acknowledged that some change is needed, while the Treasury select committee called for action in a report issued last October. 
Insurers told no softening of EU insurance rule due to Brexit uncertainty

Sam Woods told Treasury select committee chair Nicky Morgan that Brexit uncertainty made it difficult to change the rules
"We will keep this position under review and will update the committee as soon as we can see a clear way forward," said Mr Woods in a letter to the committee. 
However Huw Evans of the Association of British Insurers said the response is "very disappointing" for the UK insurance industry, which feels it is spending tens of billions in extra capital charges. 
"The Prudential Regulation Committee have chosen not to take action to address an issue which they themselves have said is having a highly damaging impact on the UK insurance industry and its customers," he said.
"While it is a step forward for them to confirm a technical solution to the problem exists within the current Solvency II framework, that only makes it more frustrating to hear that uncertainty about Brexit has prevented the regulator acting in a way that makes sense for UK plc.” 
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