“ life beyond solvency ii : a view from the top of the regulator ” speech given by charlotte gerken, executive director of insurance supervision remarks delivered at the association of british insurers ( abi ) prudential regulation webinar keynote address 19 may 2020 i would like to thank megan bell, fred schneider, alan sheppard, manuel sales, lewis webber, santosh pandit, stefan claus, paola vega and patrick cleary for their help in preparing these remarks. all speeches are available online at www. bankofengland. co. uk / news / speeches good afternoon. many thanks to the abi for inviting me to speak at this prudential regulation webinar. when i was asked to give a view from the top of the regulator, i can ’ t say i ’ d been expecting to give that view from south west london. thinking about the theme of today ’ s webinar, ‘ life beyond solvency ii ’, the scope of my talk is two - fold : firstly to reflect on what we have learned about solvency ii during a first test of the regime, to inform how our regulatory framework may develop following the end of the eu withdrawal implementation period. and secondly beyond the solvency ii regulatory regime, what some of our key supervisory priorities are. as a result of the challenges presented by covid - 19, we – like you – had to shift resource from our longer term business priorities – including supervision and policy reform – to short - term crisis management. it ’ s therefore worth taking some time to think about what we as the prudential regulator and the insurance industry have already learnt from the current crisis – including how the solvency ii regime has responded. none of us knows how the full effects of the coronavirus pandemic will unfold. our aim at the bank, alongside colleagues at the fca and within government, is to build a bridge across the economic disruption created by the pandemic and help uk businesses, consumers and the financial sector to the other side. insurers will need to be on the front foot in identifying the potential impacts on their longer - term business models in order to meet changing customer expectations. covid - 19 : what role has solvency ii played in the industry ’ s response? i have talked previously about the principles of solvency ii that the pra supports - a whole balance sheet, market consistent approach to regulatory solvency, and focus on good governance and risk management 1.

around business interruption and travel policies in particular. there is a critical role for insurers to adapt and ensure they are able to meet customers ’ insurance needs whilst managing their commercial operations, particularly during the transition out of the crisis and into the longer term. firms should take early steps to assess what changing customer behaviours or expectations could mean for their current business models. although it ’ s difficult to see beyond the immediate crisis, this pandemic is reinforcing two important things. there are a number of measures contained in solvency ii that have effectively mitigated the pro - cyclical effects caused by the disruption to financial markets. and second, the importance of the fundamental principles of the regime during a systemic event – those that require prudent capital and risk management. these can be expected to endure in any future version of our regulatory regime and will be critical for insurers to successfully navigate the complex landscape of emerging risks. https : / / www. bankofengland. co. uk / prudential - regulation / publication / 2020 / pra - statement - on - prioritisation - covid19 all speeches are available online at www. bankofengland. co. uk / news / speeches appendix chart 1 : corporate spreads and the matching adjustment source : boe calculations using bank of america merrill lynch corporate spreads data, eiopa technical information chart 2 : symmetric adjustment of the equity capital charge source : eiopa “ symmetric adjustment of the equity capital charge april 2020 ”. retrieved from https : / / www. eiopa. europa. eu / tools - anddata / symmetric - adjustment - equity - capital - charge _ en all speeches are available online at www. bankofengland. co. uk / news / speeches chart 3 : uk volatility adjustment source : boe calculations using bank of america merrill lynch corporate spreads data, eiopa technical information all speeches are available online at www. bankofengland. co. uk / news / speeches