Bank of England gives insurance firms go-ahead on Solvency II plans

The Bank of England has approved the internal capital calculation models of 19 insurance firms, including Lloyd's of London, Aviva, RSA and Prudential.

The endorsement means that the firms can use an internal model to determine the amount of capital they need to set aside to protect themselves from a severe financial crisis.

The green light comes ahead of the Solvency II regime, a set of new European guidelines for the insurance industry that will come into force at the start of 2016.

Andrew Bailey, the chief executive of the Prudential Regulation Authority (PRA) said: "[This] marks a major milestone in the implementation of Solvency II in the UK. The PRA has approved 19 insurers’ internal models for use from day one of the new regime.

"Going forward we will monitor insurers’ models carefully in order to ensure they continue to deliver an appropriate level of capital."

Another 21 insurance firms have already had their models rejected by the PRA, meaning they will have to use a standard model until they can agree measures that the authority is satisfied with.