Chancellor Rishi Sunak has finally begun to release the UK from its EU shackles with a promise to unlock billions of cash to invest in the economy.
John Glen, economic secretary to the Treasury, last night laid out plans to slash the red tape faced by insurance firms so they are free to invest in Britain’s growth.
Speaking at the Association of British Insurers’ annual dinner, he said the Government would reduce the amount of capital which insurers must hold to cover themselves in the event of a disaster.
Investment drive: John Glen, economic secretary to the Treasury, (pictured) has laid out plans to slash the red tape faced by insurance firms so they are free to invest in Britain’s growth
This would free up vast piles of cash – estimated at £95billion by some industry experts – which insurers and pension firms could then use to invest in long-term projects such as green energy plants and transport systems.
The Government also plans to cut the reporting burden on insurance firms, which must complete swathes of calculations for every investment they make.
The reforms will see Britain tear up so-called Solvency II rules, which were introduced by the EU in 2016.
Glen said: ‘EU regulation doesn’t work for us any more and the Government is determined to fix that by tailoring the prudential regulation of insurers to our unique circumstances.
‘We have an 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.’
The plans were welcomed by the industry. Sir Nigel Wilson, chief executive of Legal & General, said: ‘This is a great example of improving regulation post-Brexit, through collaboration between regulators, government and industry.
‘When implemented it will enable Legal & General to invest billions more in the UK’s levelling up, net zero and science super-power agenda.’
Amanda Blanc, chief executive at Aviva, said the reform would allow ‘insurers like Aviva to play an even bigger role in supporting the UK economy, investing more in the country’s essential infrastructure – the colleges, hospitals, transport and renewable energy which are critical to our future’.
The Treasury plans to publish a full consultation document in April. But not everyone is pleased with the reform.
Mick McAteer, a former board member of the Financial Conduct Authority, is worried consumers could end up with a raw deal.
McAteer, co-director of think-tank the Financial Inclusion Centre, told the Financial Times: ‘Reforming Solvency II is attractive to insurers, as it could generate higher fees and provide a windfall for shareholders at the expense of policyholders and pension savers that use insurance-based products.’
