The UK will seize on its post-Brexit freedoms and unlock tens of
billions of pounds of investment by slashing red tape through
reforms to the regulation of the UK insurance sector, the
Economic Secretary to the Treasury & City Minister said
today.
Speaking at the Association of British Insurers Annual Dinner
this evening (Monday 21 February), outlined plans to slash
bureaucracy and relax regulation in a move that will unlock
growth and unleash investment in UK infrastructure. The plans set
out today will further deliver the benefits of Brexit and ensure
that businesses can spend more of their money investing,
innovating and creating jobs.
It comes just weeks after the government published a policy paper
setting out how the UK is using new freedoms to become one of the
best regulated economies in the world and the Prime Minister
announced he would be bringing forward a new a Brexit Freedoms
Bill to end the special status of EU law in our legal framework.
The UK’s insurance sector has been subject to the Solvency II
rules since 2016 after they were introduced to harmonise
insurance regulation across the EU.
But Mr Glen said the EU-focused, rules-driven and burdensome body
of regulation would be reformed to become UK-focused, agile and
easily adaptable. He said the new UK regime will facilitate
rather than hinder market developments, support the entry of new
and innovative firms and allow for the release of capital for
productive investment.
The Economic Secretary to the Treasury & City Minister said: > EU regulation doesn’t
work for us anymore and the government is determined to fix that
by tailoring the prudential regulation of insurers to our unique
circumstances. > > We have a genuine opportunity to
maintain and grow an innovative and vibrant insurance sector
while protecting policyholders and making it easier for insurance
firms to use long-term capital to unlock growth.
Mr Glen also reiterated that the reforms will safeguard
policyholders with the overall level of policyholder protection
remaining strong. The PRA already has extensive powers to address
individual firm risks which provide an additional layer of
protection against firm failure.
The proposed Solvency II reforms, developed by HM Treasury
alongside Prudential Regulation Authority (PRA), include: * A
substantial reduction in the risk margin, including a cut of
around 60-70% for long-term life insurers.
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More sensitive treatment of credit risk in the matching
adjustment.
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A significant increase in flexibility to allow insurers to
invest in long-term assets such as infrastructure.
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A meaningful reduction in the current reporting and
administrative burden on firms.
The reforms are expected to create an opportunity worth in the
region of tens of billions of pounds for insurance firms to
invest in long-term capital to unlock growth, unleashing greater
investment in UK infrastructure.
In his speech, the Minister reiterated the government’s vision–
set out by the Chancellor at Manion House last year - for turning
the UK into the most green, open and dynamic financial services
sector on the planet.
Further information
-
The Economic Secretary’s speech will be
published here shortly
after delivery:
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Solvency II sets out the prudential regulatory requirements
for insurance firms within the EU. This includes financial
resources, governance and accountability, risk assessment and
management, supervision, reporting and public disclosure. It
was introduced to harmonise EU-wide insurance regulation and
came into force in 2016.
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The Government will publish a full consultation document on
proposed UK reforms to Solvency II in April 2022. This will
be followed by more detailed technical consultation by the
PRA later in the year.
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The government recently published a policy document setting
out how the UK is capitalising on the benefits of Brexit and
how the government will use its new freedoms to transform the
UK into the best regulated economy in the
world: The benefits of
Brexit
