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The Government implemented a new solvency regime, set out in the Solvency II Directive, which came into force on 1 January 2016. This risk-based regulatory system, under which UK insurance companies are regulated, was developed by the European Commission over approximately 15 years with input from the UK Government, regulators and industry.
The Prudential Regulation Authority, the regulatory arm of the Bank of England, supervises UK insurance firms and groups under Solvency II. It has statutory objectives to promote the safety and soundness of the firms it regulates and contribute to securing an appropriate degree of protection for policyholders under the Financial Services and Markets Act 2000 (sections 2b and 2c).