It is based on sound principles, such as market-consistent valuation of the balance sheet and a risksensitive approach to determining capital – many of which are embedded within Solvency II. The success of these principles was demonstrated by the resilience of the sector during 2008 But Solvency II moves beyond our current regime. So although there has been no change in our view of the type of risks that firms are exposed to, and we do not intend to use Solvency II to increase the aggregate level of required capital across the industry, this is not the same as saying that the surplus capital positions of individual firms will not change with the arrival of Solvency II. It is a different regime, with a different shape to ICAS. Firms will therefore see movements in their regulatory capital positions. For some firms these positions will be tighter, for others looser. This brings me to the second myth: that we intend to re-create the ICAS regime under the guise of Solvency II. Let me be clear: Solvency II will be the foundation of our supervisory approach and we will fully embrace the change that accompanies it. Although Solvency II BIS central bankers’ speeches  1  incorporates many of the features of ICAS, the shape of the new regime is different. The EU is moving to a harmonised, risk-based, transparent, and “going concern” regime. This means some significant changes to the shape of the balance sheet and our assessment of financial resources.
It is therefore my intention that, following a thorough and consistent review of firms’ applications, we make final decisions on all models for firms for which we are the home supervisor in early December, and communicate those decisions to firms simultaneously at that point. Firms that do not have an internal model will, of course, enter the regime on the standard formula. In conclusion, we will faithfully implement Solvency II here in the UK. We will be proportionate, and we will be robust in the pursuit of our objectives. And in doing this: •  we will not use Solvency II to increase capital requirements across the insurance sector;  •  we will not keep the ICAS regime alive; and  •  we will give firms plenty of time to adapt to the new regime. Thank you. 4  BIS central bankers’ speeches