In the previous two chapters, I described how in the first decade of the 21st century British regulators and supervisors overhauled life insurers’ evaluation machinery. The decision made by the regulator to adopt a marketconsistent approach was in part motivated by the anticipation of a European regulatory framework that would similarly be market-consistent and riskbased. However, even if the plans for the European regulatory reforms preceded the domestic reforms in the UK, the latter were implemented much earlier, which is why the previous chapter precedes this one. In this chapter, I examine the complicated relation of the British insurance industry to Solvency II. Even if British insurers and supervisors came to play a leading role in the design and implementation of the framework, they became highly critical of the rules soon after implementation in 2016, mostly because of a lack of flexibility restraining innovative investment practices. Within this context, Brexit was perceived as an opportunity to ‘take back control’ of insurance governance.

How to make sense of this change of hearts? At core, the implementation of Solvency II involved the translation of core concepts and models from modern finance theory into a set of detailed rules intended to fix their meaning. Even if the European Commission intended Solvency II as a principles-based framework – and this was indeed what the Solvency II directive adopted in 2009 was – the framework ultimately became highly prescriptive, with a large body of supporting guidelines and rules in addition to the original directive (including articles in another directive, the Omnibus II directive), which sought to define what it meant to conform to the principles of market-consistent valuation and risk-based capital. The implementation of Solvency II, moreover, was postponed several times, with the framework up and running only in 2016, seven years after the original directive was first adopted and nearly 20 years after the project had begun. The push towards detailed rules resulted from pressures to constrain the range of interpretation of the rules. While companies feared domestic supervisors would entertain relatively strict interpretations of the principles, supervisors feared that supervisors in other jurisdictions would be rather permissive.