Life insurance companies rose today as the market took a positive view on Solvency II reforms proposed in yesterday's autumn statement.
In a consultation response, published by HM Treasury yesterday the government said it would introduce a "simpler, clearer, and much more tailored regime."
Industry body, the Association of British Insurers (ABI), highlighted in particular the proposed reduction to the risk margin by 65% for life insurers and 30% for non-life insurers.
“We agreed with the Prudential Regulation Authority’s view that the risk margin was too large and sensitive to interest rates and consider that the changes proposed address both these issues” it said.
Hannah Gurga, ABI director general, said: “We strongly welcome these changes to the Solvency II regime which will allow the UK insurance and long-term savings sector to play an even greater role in supporting the levelling up agenda and the transition to Net Zero.”
“Meaningful reform of the rules creates the potential for the industry to invest over £100bn in the next ten years in productive finance, such as UK social infrastructure and green energy supply, whilst ensuring very high levels of protection for policyholders remain in place.”
Broker Barclays said most changes to Solvency II were as suggested in the consultation process.
But it viewed the outcome as positive for the UK life insurers for expanding illiquid portfolios although it is unlikely to impact bond investment strategies or dividends.
The broker saw a minimal impact on non-life insurers, but the changes may support dividends in this case.
Legal & General said it was a positive step forward adding the proposals “will allow us greater flexibility to make appropriate investments."
It estimated "the reform to the risk margin would increase the group's solvency ratio by 3-4 percentage points."
Aviva PLC (LSE:AV.) rose 1.7%, Legal & General Group PLC (LSE:LGEN) (Legal & General Group PLC (LSE:LGEN)) jumped 4.2% and Phoenix Group Holdings Plc advanced 3.2%.