The proposals would give the Bank of England wide-ranging powers to deal with acute failure scenarios, treating policyholder liabilities as loss-absorbing.

By Victoria Sander and Tim Scott

HM Treasury is proposing a new UK resolution regime for insurers that would appoint the Bank of England as resolution authority with sweeping powers to resolve insurers through transfer or bail-in, and to make resolution plans and assess resolvability in advance. The regime would share many similarities with the Banking Act 2009 (BA09). Crucially, however, there will be no minimum requirement for own funds and eligible liabilities (MREL), a BA09 concept, which sets a minimum loss-absorbing capacity for banking firms, including liabilities that can absorb losses through write-down or conversion to equity.

This Client Alert discusses the key aspects of the proposed regime, how it would impact insurers and counterparties, and next steps as the proposal is expected to proceed through the legislative and implementation processes.