Direct Line said solvency model approved by PRA

Direct Line Insurance Group said it had received approval from the Prudential Regulation Authority to use its partial internal model (PIM) to calculate the solvency capital requirement under EU solvency rules.

“In line with management's previous expectations, this approach will enable the group to operate under the PIM from 1 July 2016,” Direct Line said.

Broker Peel Hunt said the change may result in capital requirements declining, freeing up surplus in the process.

"In addition, upside risk to reserve releases combined with the ongoing tailwind of motor rate increases, may further boost earnings hence excess capital generation," it added.