An Update on the EU and UK’s Solvency Regimes

Episode Summary

In this episode of The Standard Formula, host Robert Chaplin and Skadden colleague Theo Charalambous provide a high-level refresher on Solvency II, Solvency UK and relevant recent developments as part of Skadden’s year-long podcast series on global prudential solvency requirements. The hosts detail both regimes and relevant topics, including the Matching Adjustment Accelerator (MAIA), enhanced liquidity reporting requirements, and new exit planning obligations for Solvency UK that represent a shift away from Solvency II toward a U.K.-focused approach.

Key Points

• The Strength of the U.K. Market: The U.K. is the third-largest insurance market globally, following the U.S. and China. In 2024, the U.K. held a global market share of over 5% in the insurance space and recorded total insurance premium volumes of $375 billion, representing an 11% year-on-year increase. The U.K. has the fastest-growing insurance space amongst the top 10 insurance markets globally, with more than 400 authorized insurance firms.
• Some EU Member States Are Catching Up: France, Germany and Italy are all among the top 10 insurance markets in the world in terms of total premium. In 2024, the Netherlands and Spain also reached 11% and 22% year-on-year increases in total insurance premiums, demonstrating the important role that EU member states play in the global insurance arena and the bloc’s potential growth going forward.
• Capital Requirements: Both EU Solvency II and Solvency UK maintain broadly consistent capital requirements comprising the Solvency Capital Requirement (SCR), calculated at 99.5% confidence level, and the Minimum Capital Requirement (MCR), at 85% confidence level.

Voiceover (00:02):
From Skadden, the Standard Formula is a Solvency II podcast for U.K. and European insurance professionals. Join us as Skadden partner Robert Chaplin leads conversations with industry practitioners and explores Solvency II developments that matter to you.

Rob Chaplin (00:20):
Welcome back to the Standard Formula Podcast. In past episodes, we’ve covered a series of key jurisdictions around the world. These include the United States, Bermuda, the Cayman Islands and others, including the Middle East, Japan, China and India. Today, we’re back to our home ground and will first be discussing EU Solvency II and covering the changes to Solvency II as it evolves into Solvency U.K. In the second part, we’ll cover some of the recent proposals put forward by the U.K. regulators.

(00:57):
Last November, we published our first edition of A Guide to Solvency II, in which we dissected various important topics in the EU and U.K. prudential solvency regimes. Today, we aim to give you a high-level refresher and to highlight a couple of important developments since then. This episode is the ninth in our year-long podcast series on global prudential solvency requirements, which will form the basis of our forthcoming publication, The Encyclopedia of Prudential Solvency. Joining me today to discuss the Solvency II and Solvency U.K. regimes is my colleague Theo Charalambous. Theo, it’s great to have you here to talk about this important topic. To kick off, why don’t you give us some background of the U.K. and EU insurance industries?

Theo Charalambous (01:49):
Thanks, Rob. Pleasure to be here again. Let’s start with the U.K. The U.K. is the third-largest insurance market globally following the U.S. and China. In 2024, the U.K. held a global market share of over 5% in the insurance space and recorded total insurance premium volumes of 375 billion US dollars, representing an 11% year-on-year increase. The U.K. has the fastest growing insurance space among the top 10 insurance markets globally. There are more than 400 authorized insurance firms in the U.K. In addition, London has ranked second in the top 15 centers of the insurance sector. These all demonstrate that the U.K. plays a crucial role in the international insurance and reinsurance markets. The U.K.’s insurance and reinsurance industry is overseen by the Twin Peaks regulators comprising the Prudential Regulation Authority, or PRA, and the Financial Contact Authority, or FCA. Insurers are generally subject to rules and guidance set out in the PRA Rulebook and FCA Handbook. Rob, what about the EU?

Rob Chaplin (03:16):
Thanks, Theo. We can see that some members of the EU are also catching up quickly. France, Germany and Italy are all among the top 10 insurance markets in the world in terms of total premium. In 2024, the Netherlands and Spain also reached 11% and 22% year-on-year increases in total insurance premiums. These all demonstrate the important role that EU member states play in the global insurance arena and potential growth going forward. The EU’s insurance and reinsurance industry is supervised by the European Insurance and Occupational Pensions Authority, or EIOPA. It’s an independent advisory body to the European Commission, the European Parliament and the Council of the European Union, and it helps shape the policies and laws of the EU. The EU has published a set of governing rules, which of course included the Solvency II Directive, the key topic of our episode today. Theo, can you walk us through the background to the Solvency II regime?

Theo Charalambous (04:26):
Of course, Rob. The Solvency II regime is the EU prudential solvency regime for insurance and reinsurance companies. The Solvency II Directive, the framework of the Solvency II regime, was first published in 2009 and consolidated the previously enforced insurance and reinsurance directives. This regime came into effect on 1 January 2016 and fundamentally reformed the capital requirements for insurance and reinsurers to a more risk-based approach. It’s applicable to almost all insurance and reinsurance companies in the EU.

(05:08):
The Solvency II regime is built on three pillars: Pillar one for quantitative requirements. Pillar two sets out the governance and risk management requirements and supervisory review, and pillar three comprises the disclosure and reporting requirements.

(05:29):
Following the end of the Brexit transition in 2020, there has been gradual divergence between Solvency II and what has come to be known as Solvency U.K. In addition, on 18 July 2025, the European Commission published a draft delegated act for stakeholder feedback proposing revisions to the Solvency II Delegated Regulation. The draft aims to update technical rules for valuing insurers liabilities, calculating solvency requirements, and streamlining reporting disclosure and group supervision. These changes are part of broader efforts to enhance the EU financial system’s support for investment and competitiveness. The consultation will close on 5 September 2025 with the final proposals expected in the third quarter of 2025. Despite all these ongoing changes, now is a good time to revisit some of the key aspects of Solvency II. For details, we encourage you to revisit our previous publication, A Guide to Solvency II, which is available on our website. To start off, Rob, can you walk us through the capital requirements under Solvency II?

Rob Chaplin (06:59):
Certainly, Theo, the area of capital requirements is one of those which has not been subject to changes amid the migration process from Solvency II to Solvency U.K. We expect the PRA to continue to develop these areas of divergence in the coming years. However, to date, the capital requirements under both regimes are broadly consistent. The capital requirements comprise two pillars, namely the Solvency Capital Requirement, or SCR, and the Minimum Capital Requirement, or MCR.

(07:34):
The SCR is calculated using the standard formula by default and is made up of first the basic SCR, an aggregation of capital charges arising from the different risk modules set out in the Solvency II regime, namely underwriting risks, which is further split into non-life, life, health market risks and counterparty default risks. Second, the capital requirement for operational risks. Third, an adjustment for the loss-absorbing capacity of technical provisions and deferred taxes. Fourth, a capital requirement for tangible asset risks. A detailed explanation of the SCR standard formula can be found in chapter eight of Our Guide to Solvency II.

(08:23):
Solvency II requires that the SCR is calculated at a value-at-risk that is subject to a one-year 99.5% confidence level. To illustrate this, the SCR should allow the insurer to be able to withstand, without its entire depletion, all but the most extreme risks that occur less than once every 200 years. The SCR must be calculated at least annually, and the results should be reported to the PRA or relevant EU supervisory authority. If an insurer’s capital falls below the SCR, the PRA or relevant EU supervisory authority is able to intervene in the running of the insurer.

(09:05):
On the other hand, the MCR must be calibrated to a confidence level of 85% over a one-year period and must be between 25% to 40% of the insurer’s SCR. Despite the MCR being at a much lower threshold than the SCR, if the insurer’s capital level falls beneath the MCR, then there will be more severe consequences. In these circumstances, the PRA or relevant EU supervisory authority has the right to withdraw authorization and close the insurer to new business. Insurers have a quarterly MCR reporting obligation to the PRA or relevant EU supervisory authority. An insurer must hold “own funds” at least equal to the sum of its capital requirements and in practice, rather more at least to the level of risk appetite. Now we understand the rationale behind capital requirements. Theo, tell us about the concept of own funds.

Theo Charalambous (10:09):
Of course. Thank you, Rob. At the outset, it is worth noting that own funds is another area in Solvency U.K. that is generally aligned with EU Solvency II. We expect the PRA to continue to follow current Solvency II requirements on own funds in the foreseeable future. Own funds is the Solvency II term for the items that constitute the insurer’s regulatory capital. These are principally balance sheet items, although there is a limited allowance for off-balance sheet items. Own funds are further classified as either basic owned funds or ancillary owned funds, and today we will focus on basic owned funds. Insurers are required to classify own funds into three categories with varying degrees of availability and subordination.

(11:14):
Tier one is considered of the highest quality and must dominate the portfolio, constituting at least half of the total eligible own funds for the SCR and 8% of the total for the MCR. Some non-exhaustive criteria and features include, number one, readily callable. Tier one items must be readily accessible or callable on demand to comprehensively offset losses both in ongoing operations and during liquidation. This ensures that the capital is permanently available to absorb losses.

(11:57):
Number two, loss absorption. The total amount of the item must be available to absorb losses and repayment to the holder is refused until all other obligations, including insurance and reinsurance obligations to policyholders have been met.

(12:16):
Number three, undated and redeemable at firm’s option. It must be undated and repayable or redeemable only at the option of the firm subject to prior supervisory approval.

(12:32):
Number four, no incentives to redeem. Tier one capital instruments may not include any incentives to redeem. (12:42):

Number five, dividend or coupon restrictions. Tier one capital instruments may not allow for payment of a dividend distribution or coupon in the event of a breach of the SCR or where such payment would lead to a breach unless certain conditions are met.

(13:05):
Number six, full flexibility over distributions. The instrument must provide for full flexibility by the reinsurer over any dividend or coupon.

(13:17):
Number seven, tier one capital components. Tier one capital includes paid-in ordinary share capital (or equivalent), surplus funds (effectively profit), reconciliation reserve (allowing for foreseeable dividends and expected profits in future premiums), and paid-in preference share capital and subordinated debt (restricted Tier 1 or RT1).

(13:47):
Number eight, RT1 redemption restrictions. RT1 instruments must not be redeemable before five years after issuance and may only be redeemable between five and 10 years after issuance, provided the SCR is exceeded by an appropriate margin.

(14:08):
Number nine, RT1 distribution flexibility. For RT1 instruments, additional conditions include further conditions regarding this flexibility, including unrestricted authority for firms to indefinitely cancel distributions on a non-cumulative basis.

(14:29):

Number 10, principal loss absorption mechanism. RT1 instruments must feature a mechanism that upon a significant breach of the SCR or MCR aims to act as a principal loss absorbing mechanism and sets out the trigger events for that principal loss absorbing mechanism.

(14:53):
Tier II capital has less requirements than Tier I. For instance, it requires items to have the following characteristics. Number one, duration. As for Tier I, it must be undated and repayable or redeemable only at the option of the firm subject to prior supervisory approval.

(15:18):
Number two, subordinated. Ranks after policyholders and non-subordinated creditors.

(15:26):
Number three, duration. Undated or at least 10 years original maturity and as for Tier I, the first redemption, no earlier than five years.

(15:40):
Number four, redemption. It’s at the issuer’s discretion subject to supervisory approval.

(15:48):
Number five, incentives to redeem. Unlike Tier I, there are limited incentives to redeem, which are only after 10 years and subject to strict quantitative limits.

(16:02):
Number six, distributions. Distributions may be fixed or cumulative and must be deferrable on SCR breach.

(16:12):
Tier III basic owned funds effectively represent the remainder of the balance sheet items, subordinated after policyholder and beneficiary claims, and have a minimum maturity of five years. They include a wider pool of assets including deferred tax assets. Tier III items must be minimized, constituting less than 15% of the total eligible owned funds for the SCR. For details in relation to the categorization of own funds, please refer to chapter one of Our Guide to Solvency II. It’s important to bear in mind that different categories of investment engaged by the insurers will attract different capital charges when calculating the SCR. Therefore, it is important to look at the investment rules for insurers and reinsurers.

Rob, to begin, please run us through what we mean when we talk about the Prudent Person Principle, which is a key concept when we talk about investment rules.

Rob Chaplin (17:22):
Thanks, Theo. The Prudent Person Principle, or PPP, refers to the general standard of prudent investment which insurers and reinsurers must comply with in respect of their entire asset portfolio. The principle which sets out objective standards for prudent investment is developed under the Solvency II regime and adopted in the PRA rulebook. The principle requires that an insurer’s or a reinsurer’s whole portfolio of assets must only include assets for which first the insurer can properly identify, measure, monitor, manage, control and report the risks.

(18:01):
Second, it can appropriately take into account the assessment of the insurer’s overall solvency needs.

(18:08):
Third, it can be invested in such a manner to ensure portfolio security, quality, liquidity and profitability.

(18:16):
Fourth, are localized as such to ensure their availability.

(18:21):
And last but not least, in the context of conflict of interests, assets that are invested in the best interests of policyholders and other specified beneficiaries.

(18:32):
For all assets other than those held in respect of life insurance contracts where the investment risk is borne by policyholders, there are additional requirements such as the investment should be properly diversified and there is not excessive risk exposure to a particular issuer or group. Since Solvency II came into force, a more market-favored and flexible regime applies to investment rules, and the PPP is a key concept. For instance, the rules capping investments in unlisted securities at 10% are no longer applicable. In addition, Solvency II also comes with a prohibition on EU member states from requiring insurers to invest in only a particular category of asset or seek pre-approval for investment decisions. Now, Theo, why don’t you introduce us to some of the guidelines established by the EU and U.K. regulatory bodies?

Theo Charalambous (19:27):
Of course, Rob. The PRA and the EIOPA have published guidelines on the investment activities of their respective regulated insurers or reinsurers. In the U.K., the PRA requires that insurers investment strategies should be aligned with its investment objectives and asset allocation, the board’s risk appetite, risk tolerance limits, investment risk return objectives, as well as alignment of the investment strategy with its business model. Additionally, where an insurer or reinsurer chooses to outsource its investment activities to an external party, it must be subject to appropriate due diligence, and the outsourced entity must equally be able to comply with the requirements of the supervisory statement. On the EU side, the EIOPA has published guidelines on the system of governance, which provides that there should be regular reviews of a firm’s investment portfolio, which includes, for example, considering the relevant liability constraints and the level and nature of risk that the insurer is willing to accept.

(20:48):
The guidance is reflective of what Solvency II requires, namely that the entire portfolio is monitored on a continuing basis for compliance with the pudency requirements. Where an investment is of a non-routine nature, EIOPA also states that additional due diligence should be conducted, including an assessment of the associated risks of the investment, the insurer’s internal liability constraints and its ability to manage the investment properly. Similarly, where an investment is complex, not admitted to trading on a regulated market or otherwise difficult to value, it should be monitored closely. For details in relation to the investment rules, please refer to chapter six of Our Guide to Solvency II. Now we have an idea about the investment rules under the Solvency II and the Solvency U.K., we know that the matching adjustment is another crucial framework affecting the investment decisions of insurers, especially those with long-term insurance products. Rob, why don’t you give us an introduction of the matching adjustment regime?

Rob Chaplin (22:08):
Definitely, Theo. The matching adjustment regime is a key regime in Solvency II with some recent updates, which we’ll cover in a moment. To start with, the matching adjustment is a mechanism that allows insurers to recognize upfront as capital resources a portion of the investment return that they project to earn over the future lifetime of the assets matching their insurance and reinsurance liabilities. More technically speaking, the matching adjustment is an adjustment to the discount rate that can be applied to the valuation of insurance and reinsurance obligations in certain specific conditions. It’s designed to allow writers of certain types of long-term business, principally annuities, who are able to hold backing assets to maturity to use a discount rate closer to the credit-adjusted market rate of return for the relevant liabilities instead of the risk-free rate. Theo, are there any eligibility conditions for liabilities and investment assets under the matching adjustment framework?

Theo Charalambous (23:10):
Certainly, there are. As we have just discussed, the matching adjustment framework mainly targets insurers with long-term insurance products. To expand on this, only certain liabilities are eligible for matching adjustment treatment. Let’s start with the EU Solvency II regime with respect to matching adjustment eligible liabilities. First, they must be life insurance or reinsurance obligations including annuities.

(23:42):
Second, the portfolio of reinsurance to which the matching adjustment is applied must be identified, organized and managed separately from the other obligations of the undertaking.

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Third, the contracts underlying the insurance or reinsurance obligations must not give rise to future premium payments.

(24:06):
Fourth, the only underwriting risks connected to the portfolio of insurance or reinsurance obligations are longevity, risk, expense risk, revision risk and mortality risk.

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Fifth, the contracts underlying the insurance or reinsurance obligations must not include any policyholder options other than a surrender option where the surrender value does not exceed the value of the assets covering such insurance or reinsurance obligations at the time the option is exercised.

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Sixth, the insurance or reinsurance obligations of a contract must not be split into different parts when composing the matching adjustment portfolio of insurance or reinsurance obligations.

(24:56):
So what about the U.K.? The PRA adopted the liability criteria under the EU regime and went on to set out this expectation in one of its supervisory statements, Supervisory Statement 7/18. It addresses some of the key aspects such as future premium payments and surrender options. Supervisory Statement 7/18 was further amended by the PRA under Policy Statement 1024, which was published in June 2024, which we’ll speak about later.

(25:36):
For matching adjustment eligible assets, the assets backing the relevant insurance or reinsurance liabilities must meet the following conditions under the EU Solvency II regime. First, the portfolio must consist of bonds and other assets with similar cash flow characteristics.

(25:57):
Second, the assigned portfolio of assets must be identified, organized and managed separately from other assets of the undertaking.

(26:08):
Third, the expected cash flows of the assigned portfolio of assets must replicate each of the expected cash flows of the portfolio of insurance or reinsurance obligations in the same currency and any mismatch must not give rise to material risks.

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Last but not least, the cash flows of the portfolio of assets must be fixed and must not be able to be changed by the issuers of the assets or any third parties.

(26:41):
That being said, this rule is relaxed so that first inflation-linked assets are permitted, provided that the assets replicate the cash flows of reinsurance obligations, which depend on inflation, and second, a right of the issuer or a third party to change the cash flows of an asset is permitted, provided that the reinsurer will receive sufficient compensation to allow it to obtain the same cash flows by reinvesting in assets of an equivalent or better credit quality.

(27:17):
Similarly, in the U.K., the PRA adopted the EU position and took the initiative to clarify its position on some of the key asset eligibility conditions including bonds, mixed cash flows and reinsurance assets. Further details in relation to the matching adjustment framework are set out in chapter five of Our Guide to Solvency II. Now we see that unlike capital requirements and owned funds, there has already been divergence between the EU Solvency II regime and Solvency U.K. on the topic of matching adjustment. Rob, is that right?

Rob Chaplin (28:01):
Yes, Theo. That’s right. Following Brexit, the U.K.’s reform efforts in this area have continued apace, resulting in an additional round of reforms designed to further streamline and update the MA. The PRA has explored ways to creatively apply the MA, the latest set of MA reforms became effective in June 2024. At the same time, the EU has also looked again at the MA as part of its 2020 review of the Solvency II directive, but this was limited to narrow issues such as the removal of the limitations to the diversification benefits between MA portfolios and other portfolios in the calculation of the SCR.

(28:44):
In April 2025, the PRA took one step further and published Consultation Paper CP 7/25 for the Matching Adjustment Accelerator, or MAIA. For the avoidance of doubt, the MAIA proposal only applies to U.K. insurers and reinsurers. The consultation closed on the 4th of June 2025 and the rules have not yet been published or implemented, but the PRA expects this to take place in the fourth quarter of this year.

(29:16):
Currently, U.K. insurers must apply to the PRA to include specific assets in a matching adjustment portfolio to benefit from matching adjustment capital treatment. This process can take up to six months to secure approval. The development of the MAIA framework would aim to shorten the application process, which at present can lead to missed investment opportunities for insurers.

(29:40):
The proposed MAIA framework would allow those insurers that hold existing matching adjustment permission to apply for a MAIA permission. Once granted, MAIA permission would allow insurers to self-assess and include certain assets into their MA portfolio that they consider to be eligible without first requesting a variation to their existing MA permission. Insurers would then have two years to apply to the PRA to formally include these assets in the MA portfolio. In the meantime, they will continue to benefit from the MA capital treatment in this interim period. Once the application is approved, the MAIA assets are integrated into the firm’s MA portfolio and no longer count against the MAIA exposure limit. Theo, now we see the flexibility and benefits that the MAIA could potentially bring to insurers, is there anything an insurer should note when applying for an MAIA permission?

Theo Charalambous (30:39):
Absolutely. During the application process, it is intended that the insurer would be required to propose an MAIA exposure limit. The PRA has suggested a general MAIA exposure limit, which is the lower of 5% of the best estimate of liabilities of the matching portfolio, which is net of reinsurance or any amount less than 2 billion pounds sterling as proposed by the insurer.

(31:11):
Once an MAIA permission is secured, the PRA has proposed requiring those insurers to maintain suitable procedures and controls, including an MAIA policy, which should outline, non-exhaustively, any governance or oversight processes in connection with how assets are assessed for inclusion in a firm’s matching adjustment portfolio using the MAIA permission, the intended use of its MAIA permission, which may include a description of assets that would or would not be appropriate for inclusion in the matching adjustment portfolio and a description of a firm’s MAIA risk appetite framework.

(31:59):
The PRA has also proposed that firms maintain contingency plans for each MAIA asset for circumstances where MAIA assets were determined to not be matching adjustment eligible and therefore had to be removed from the matching adjustment portfolio.

(32:21):
One more point to note is the reporting requirements. The PRA has proposed to introduce an annual MAIA use report and to make changes to the matching adjustment asset and liability information return reporting template. Insurers who are interested in taking advantage of the MAIA should definitely be aware of these potential continuous requirements. Speaking of reporting requirements, Rob, could you tell us about some other recent PRA proposals that may affect U.K. insurers and reinsurers and represent additional shifts away from EU Solvency II?

Rob Chaplin (33:07):
With pleasure, Theo. First, last December, the PRA issued another consultation paper, which targets large insurance firms with significant exposure to derivatives or securities involved in lending or repurchase agreements. The PRA notes that U.K. life insurers are increasingly using derivatives and other financial instruments to manage various risks to their business. Such instruments can be a significant source of liquidity risk because they can require firms to increase margin or collateral payments when market conditions change, resulting in rapid and substantial outflows. The PRA proposes the implementation of enhanced liquidity reporting for insurers that meet the certain liquidity risks conditions contained in the proposed new rules. If insurers meet any of these conditions, they must commence liquidity risk reporting on the first reporting reference date after these conditions have been met. Theo, tell us about the second proposal on reporting obligations.

Theo Charalambous (34:07):
Of course, Rob. The second proposal is related to live insurers. The PRA proposes to remove the expectation for live insurers with internal model permissions to annually submit the SF.O1 template containing solvency capital requirement information calculated using the standard formula. The PRA acknowledges that the template may be less effective in detecting model drift in internal models for live insurance firms. These regulatory updates on reporting requirements are to come into effect on 31 December 2025. Now, Rob, before we wrap up, it would be great to discuss the recent policy statement on Solvent Exit Planning Policy Statement 2024 for insurers.

Rob Chaplin (35:02):
Sounds good, Theo. The new solvent exit planning regime is two-fold. First, it relates to the planning for a solvent exit on a business as usual basis, which is applicable to all insurers, and second, it targets insurers where solvent exit becomes a reasonable prospect.

(35:20):
For the first thing, the insurers will be required to prepare for a solvent exit and more specifically, they must produce a Solvent Exit Analysis, or SEA, and update it whenever a material change has taken place that may affect its preparations for a solvent exit. In any case, the SEA has to be updated at least once every three years. Insurers must be able to provide the PRA on request, the current version of its SEA. For the content of the SEA, the level of detail should be proportionate to the circumstances of each insurer. However, it must include solvent exit actions, these are the main options that a firm considers appropriate for a solvent exit, such as a run-off sale or partial sale, or a merger with another insurer.

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For each option, a firm should set out in its SEA the actions that would be needed to cease its PRA regulated activities while remaining solvent.

(36:18):
Solvent exit indicators, a firm should identify and monitor indicators that would inform it about when it may need to initiate a solvent exit and whether the execution of a solvent exit is likely to be successful.

(36:34):
Potential barriers and risks, the PRA lists internal and external potential barriers and risks to a firm’s execution of a solvent exit of a financial and non-financial nature. In addition to these key concepts, the SEA shall also cover other administrative aspects including resources, communications, as well as governance and decision-making. Theo, what will happen when there is a reasonable prospect that an insurer may need to execute a solvent exit?

Theo Charalambous (37:09):
Rob, when a solvent exit becomes a reasonable prospect, the insurer will be expected to produce the Solvent Exit Execution Plan, or SEEP. In terms of content of the SEEP, it mirrors some of the content headings of the SEA we mentioned just now. In addition, the SEEP should provide the PRA a detailed execution plan for the proposed solvent exit. The insurer should ensure that the SEEP is thoroughly considered by the board of directors and is able to overcome the potential barriers and risks as set out in the SEA. It should also be supported by sufficient resources. Another key area to keep in mind is communication. The insurer initiating a solvent exit should inform the PRA at the outset and keep the PRA informed throughout the process. Also, it is expected to have clear and efficient communication with stakeholders impacted by the solvent exit. These changes in relation to solvent exit will come into effect on 30 June 2026.

Rob Chaplin (38:33):
Thank you, Theo. We’ve also touched upon the recent proposals targeting the U.K. regime. In 2025, the PRA continues to focus on implementation of reforms on the Solvency U.K. regime to achieve objectives such as fostering a vibrant, innovative and internationally competitive insurance sector, protecting policyholders, ensuring safety and soundness of firms, and supporting firms to make long-term investments to support growth. We’ll, of course, keep you informed of the latest developments and headlines in the U.K. and EU insurance regulatory landscapes. Before we end, please do visit our publication from November 2024, Our Guide to Solvency II, for more detail. We look forward to welcoming you in the next episode of our podcast, which will cover prudential solvency regulation in Latin America and the Caribbean. Thank you for listening today.

Voiceover (39:29):
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