BoE's Independent Evaluation Office (IEO) looked at how the
central bank's supervisory arm, the Prudential Regulation
Authority (PRA), ensures policyholders are properly protected.
The IEO said on Monday that the PRA's "articulation of its
policyholder protection responsibilities appears to be
PRA work on policyholder protection had been "crowded out" by
"live supervisory issues" and the need to implement European
Union capital rules known as Solvency II by January 2016, the
IEO said in a report.
The BoE's supervisors need to articulate fully their approach to
protecting policyholders, though there was no evidence that PRA
supervisors were falling short of their duties, the IEO said.
The PRA should also ensure there is appropriate coordination
with its sister regulator, the Financial Conduct Authority.
BoE Deputy Governor and PRA Chief Executive, Sam Woods, said the
IEO's assessment was informative and balanced, and that the PRA
has agreed a set of actions in response.
The PRA will be clear that it does not seek to protect all
policyholders equally, but will direct more of its resources to
those who would suffer greater financial hardship if their
policies did not pay out as promised, Woods told the London
Business School in a speech.
Britain's exit from the EU has also raised hopes in the sector
that Solvency II will be overhauled, but Woods reiterated there
would be tweaks, rather than a broad overhaul.
Woods said the debate about Solvency II has become a "cacophony
of acronyms" emanating from a "magic circle of insurance
"But strip this back and you’ll see there is an essential,
irreducible human core to it all," Woods said.
"Some of the oldest and most vulnerable in our society have
invested their life savings into long-term annuity contracts,"
"So when we talk about promoting insurers’ safety and soundness,
and protecting their policyholders, this is what we have in
(Reporting by Huw Jones; Editing by Alexander Smith)
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