So when we talk about promoting insurers’ safety and soundness, and protecting their policyholders, this is what we have in mind. The PRA has squeezed much into its short life since it began supervising insurance companies in 2013, not least the enormous undertaking of implementing Solvency II, and knitting insurance supervision into the wider Bank, where there are obvious connections with areas like monetary analysis. And today, the Bank of England’s Independent Evaluation Office has published its thinking on the PRA objective which is unique to insurance, of contributing to the protection of policyholders. All this makes now the ideal time to refresh our approach to insurance supervision. I will begin by taking stock of insurance regulation. These are the rules and standards which apply across the board, and have been recently the subject of ongoing and lively debate. Now that Solvency II has applied, how do we take it forward? From there I would like to explore our approach to insurance supervision – the day-to-day business of 1  understanding, assessing and challenging the 469 firms we are responsible for. In particular, how do we at the PRA think about policyholder protection? 1  This is a consolidated view of insurance groups – there are approximately 600 insurance entities, including solos that are part of groups. 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  And what is the point of all this?
In fact, the PRA’s resourcing model already works to focus our resources on those areas of most concern. We categorise each regulated firm according to its size and the potential harm customers would suffer should it fail. The majority of firms we regulate are assigned the lowest category, reflecting the low level of risk they pose to our objectives. Firms in higher categories receive more supervisory and specialist resources, and decisions for those firms are approved at more senior levels within the PRA’s decision – making framework. The IEO have challenged us to look at this system again and we will do so. Our Executive Director for Insurance Supervision, David Rule, will take forward discussion of all of these issues with the Prudential Regulation Committee. We will then revise our Approach to Insurance Supervision document to explain any changes we decide to make. In doing this we will of course need fully to factor in our third objective, to facilitate effective competition – 12  which was also recently reviewed by the IEO . Although this is a secondary objective, it is given a high priority in the PRA and is also quite rightly a topic in which the Treasury Select Committee takes a strong interest. Our competition work spans banking and insurance, but there has been much more public debate about the former.