Insurers have been given another year to become compliant with Solvency II (SII), the Financial Services Authority (FSA) announced today.
The date by which UK firms must now comply with SII is 1 January 2014 rather than 2013, the regulator said.
Domestic regulators and the European Insurance and Occupational Pension Authority (EIOPA) will still assume their SII responsibilities from 1 January 2013.
The measure is a compromise between European regulators keen to move quickly on SII, which will require insurers to have similar capital adequacy levels to banks, and UK insurers resistant to the change.
"We have developed an approach that balances what we need to do to discharge our regulatory obligations and bring in the new regime with the needs of the industry," the FSA said in a statement.
In September this year Financial Secretary to the Treasury Mark Hoban told the industry the government would not hand over authority to Europe.
In March, Hoban denied the Treasury did too little to protect UK insurers from the European ban on gender-based underwriting.
Firms who intend to use their own internal model for complying with SII will have until mid-2013 to apply to use their own model, instead of a deadline of 31 May 2012.
Jim Bichard, insurance partner at PwC (pictured), said many insurers will aim for an internal model in an attempt to save money.
"Insurers are likely to view the revised timetable differently depending on where they are positioned in the process," he said.
"At one level, it is encouraging the internal model application period (IMAP) start date remains the same, but the timetable extension risks some companies losing momentum.
"This will add to the industry's concerns any additional delays will add unnecessary costs as second tier firms will have to rely increasingly on independent assurance their model plans are fit."
He added the lMAP extension may disappoint the largest insurers, who have already spent resources rushing to comply with the new legislation.
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