The abolition of regulation of the big bang of the insurance sector in the UK was a very active “Brexit dividend”. It becomes uncomfortable showdown. The reform places the industry regulator, laden with technical expertise and a crucial mandate to ensure financial stability, vis-à-vis the government. Downing Street has broader concerns, including competitiveness and sustainable growth in the industry.
Changes are being made to the so-called Solvency II rules. EU countries have already done so agreed upon Amendments to its corresponding rulebook. The UK has parallel financial services Review of a future regulatory framework.
At stake: about £ 4 billion of investment held, roughly equally, by insurance companies and pension funds. More than that should be freed up for investment in assets like infrastructure, like wind farms or social housing, the government estimates.
That seems fair enough. These are long-term assets with expected cash flows that match long-term liabilities. When they operate they can benefit the economy. The numbers vary, but adjustments to risk margins will release £ 18 billion for life insurers alone, based on end-2020 data. Lower capital requirements, all else being equal, may translate lower commissions to consumers. The industry will be happy to remove some of the existing cables and opportunity to use capital More idle.
But the precautionary regulations of the Bank of England, which oversees insurance companies, have valid concerns. As a regulator, it is inherently risk-averse and is related to integrity and protection – as it should be.
As things stand, the UK is among the smartest and most populous global insurance sectors. It boasts heavy rule books. The pension legislation, which filled out 3,000 pages in the late 1980s, has expanded to more than 100,000. Of course, the range of products and sophistication have also grown exponentially. It is true that regulators can use a push from the government to take a more holistic approach. But this is not a matter of overturning. The rules are better guided by those who understand risk than those who seek to achieve success in Brexit.
Newsletters are recommended for you
Not fenced – Robert Armstrong analyzes the most important trends in the market and discusses how the best Wall Street minds respond to them. Sign up Here
FT Property Management – The inner story of the motives and upheavals behind a multi-billion dollar industry. Sign up Here
Insurance/Solvency II: cautious sector has no appetite for rapid change Source link Insurance/Solvency II: cautious sector has no appetite for rapid change