UK insurers have warned that a proposed post-Brexit overhaul of rules governing the sector would increase capital requirements for some providers and could expose the government to hope of a “big investment explosion” from the reform.
Ministers hope overhaul of the so-called Solvency II mode, which inherits from the EU, will allow insurers to invest tens of billions of pounds in UK infrastructure. But the Bank of England’s Prudential Regulator, which oversees the sector, said earlier this month the overhaul could not be a “free lunch” for the industry and that rules would need to be tightened. in other fields.
In a reply to the consultation, which ends on Thursday, the Association of British Insurers welcomed the plans to reduce the risk margin, a capital-raising buffer. But it added that for life insurers, the PRA’s proposed changes to how their liabilities are calculated would more than offset this benefit.
Contrary to government claims that the reforms will reduce the amount of capital that life insurers must hold, the ABI warns that the overall impact will force them to hold more and could affect their holdings. affect customers, or mean less investment in productive assets.
“Current proposals. . . Hannah Gurga, General Manager of ABI, said.
The Treasury said it was “determined” to make sure the rules worked “in the best interest of the UK”, adding that it was working closely with regulators and the industry. to redesign them. PRA declined to comment.
The long-awaited financial services billwas introduced on Wednesday in what prime minister Nadhim Zahawi described as a “landmark day”, paving the way for the reform of the Solvency II regime.
The 335-page bill, which has been the subject of more than 30 separate consultations, is the UK’s biggest legislative step to free the financial sector from what the government sees as too heavily regulated. EU and make good on their pre-Brexit money-cutting promises. through red tape.
“We are de-regulating hundreds of EU heavyweights and embracing the benefits of Brexit to ensure the financial sector works for the benefit of British people and businesses,” added Zahawi.
Most of the bill’s measures have been closely followed, including one that gives regulators the power to oversee the most secure cryptocurrency, known as stablecoins. BoE required more than a year ago. The government is planning a broader crypto regulation consultation later this year.
It also gave the Financial Conduct Authority and the PRA a new secondary mandate to promote competitiveness and growth, a move supported by a “significant majority” of public consultation respondents.
The bill has been widely welcomed by industry bodies and lawyers. Adam Farkas, head of the London-based European Financial Markets Association, said the law would “bring about meaningful change” and would “ensure high regulatory standards are maintained”.
But the law omits a controversial “call-out clause” that would have given the government the power to intervene in financial regulation in the public interest, after the measure alarmed regulators.
Zahawi said earlier this week that the calling provision would not be included in the bill but was still being “reviewed”. Amendments to the bill could be made at committee stages in parliament in the fall or as it moves to the House of Commons.
The bill opens the door to some additional directions by regulators, through a more limited “rule review” that would allow the Treasury to order regulators to review regulations. new. The rule review process will be public.
Respondents to Treasury consultations “generally welcome” the rules review measures, but some said they need more clarity on how it works and want more measures to improve accountability explanations from regulatory authorities.
The bill confirms for the first time that the HMT will accelerate the implementation of new rules to make the UK’s capital markets work more efficiently. The bill is expected to be signed in the first half of next year.
