The Union has not established a workable timetable after more than a decade of planning and failed to harmonise the vastly different markets of the UK, France and Germany, leading to rising costs, they said.
In a pointed example, Bailey said the PRA puts the incremental costs of continuing to implement what it can of Solvency II at about £5-7m annually.
The ill-feeling was revealed in a series of letters between Tyrie (pictured) and Bailey, which have been made public by the Treasury Committee.
Solvency II aims to strengthen the prudential regulation of the insurance sector – specifically by increasing the capital requirements on firms – and ensure policyholder protection.
Tyrie (pictured) said: “Mr Bailey describes the history of the EU decision-making process on Solvency II as ‘shocking’. He is right to do so.
“For the best part of ten years it has been mired in uncertainty, at great cost to the regulators, insurers and, ultimately, consumers. Solvency II is an object lesson in how not to make law.”
Tyrie added the Committee had yet to be convinced of any measurable benefits that Solvency II will bring.
“Even now, no one can be sure what it [Solvency II] will add,” he said. “Sufficient flexibility must be built into any proposals to allow national regulators to exercise judgement. The PRA should implement them in a way which maximises the protection from risk whilst guarding against the temptation to engage in unnecessary gold-plating.
“The PRA has decided to use ‘early warning indicators’ to assess potential threats to solvency, apparently notwithstanding the risk of EU challenge. This is probably necessary; complex models are all too easily gamed. A strong UK backstop must be in operation.
“It is the role of the regulator to make sure that insurance companies, just like the banks, are adequately capitalised.”
