In 2016, the Solvency II rules for insurers came into effect and the UK voted to leave the EU.
Six year later, these two episodes became intertwined and propelled into headlines, as the government rounded on Solvency II reforms as one of the ways the country could demonstrate a Brexit dividend by departing from EU rules.
Steering the industry's agenda through those reforms was David Otudeko and his prudential risk and regulation team at the Association of British Insurers: Xavier Solano, Robert Warren, Caitlin Wagner, Rebecca Lea and Janice Fordjour.
Their work had started in earnest in October 2020, when the government launched its call for evidence on the Solvency II review. Over the next two years, the team worked with the industry to bring together a consensus on proposals for reform. The team also engaged consultancies KPMG and WTW to produce influential reports that demonstrated the benefits from measures such as reducing the size of the risk margin and opening up the eligibility criteria for assets and liabilities in matching adjustment portfolios.
As ideas for reforming the rules became more defined, the topic rose up the political agenda. Liberating capital for investment in the economy, via adjustments to Solvency II, became a stock answer for any government politician asked to explain a benefit from Brexit. It was even bandied about during the Conservative Party's elections for leader and prime minister.
But it wasn't certain the industry would gain anything. The Prudential Regulation Authority (PRA) had its own ideas what the reforms should entail. In particular, it proposed a new method for calculating the matching adjustment to make it more sensitive to credit risk.
Work by the ABI and WTW showed the PRA's methodology would be punitive for life insurers and therefore prevent the government from achieving a key goal of releasing capital for investment in the economy.
With the spotlight firmly on the team, they successfully lobbied at the highest levels of government, HM Treasury and the PRA.
The crowning achievement of their year was the government's announcement on 22 November 2022 of a reform programme that dropped the Bank's matching adjustment proposal and created the potential for the sector to invest £100bn ($121bn) over the next 10 years in productive assets.
In the team's own words: "We succeeded in securing reform which, if implemented meaningfully, would provide a significant Brexit dividend for the UK insurance and long-term savings industry, but also ensured that this central piece of prudential regulation was appropriately tailored to reflect UK market specifics."
