Proposed overhaul of insurance sector regulation will create a
more tailored and dynamic regime, unlocking billions of pounds of
investment in UK infrastructure.
Protection for policyholders will remain a top priority.
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), John Glen 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 John Glen
> 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.
More sensitive treatment of credit risk in the matching adjustment.
A significant increase in flexibility to allow insurers to invest in long-term assets such as infrastructure.
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
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
The Economic Secretary’s speech will be published here shortly after delivery:
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.
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.
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