There is currently no comprehensive framework for the resolution of insurers in the UK. However, regulatory pressure has been ramping up and the PRA has confirmed that one will be introduced in the foreseeable future. KPMG insurance, banking and regulatory experts consider how the framework might develop.
In his “Brave New World” speech at the ABI in March 2021, Sam Woods, CEO of the PRA, noted that: “The PRA does not aspire to a zero-failure regime…. What we do have is a very low appetite for disorderly failure… The UK does not yet have a resolution authority for insurers, as recommended in the FSB's key attributes. Assessing firms' preparedness for exiting the market in an orderly manner, and working with boards to make improvements where needed, will be an increasing focus of our supervision in the next few years.”
The Financial Stability Board's (FSB's) 'Key Attributes', set out in 2011, describe the core elements necessary for an effective resolution regime for financial institutions and were intended to enable regulatory authorities to resolve financial institutions around the globe in an orderly manner, without the need for taxpayer money, while maintaining continuity of their vital economic functions.
Regulators initially focused on banks, given their interconnectedness and greater perceived threat to financial stability. However, recovery and resolution requirements for insurers have been developing along similar lines, albeit at a slower pace. In 2014, the FSB adopted guidance on how the Key Attributes should be applied to insurers, and in 2016 it released principles on resolution planning for systemically important insurers.
Our latest article explores the PRA's current approach to recovery and resolution for insurers and considers what an augmented regime may look like. It also looks at the experience of banks and what insurers may expect as the PRA turns its focus on them.
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