The insurance industry will be reformed to better meet the needs of British businesses, it has been announced.
The move comes after the UK officially left the European Union in January last year, paving the way for the Government to implement its own rules and regulations.
According to the Government, the changes – developed by HM Treasury alongside the Prudential Regulation Authority (PRA) – will “cut red tape” and “unlock billions of pounds” for investment in UK infrastructure and businesses.
This includes:
- A substantial reduction in the risk margin, including a cut of around 60 to 70 per cent 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 current rules – known as Solvency II – were implemented in 2016 to unify regulations across the single market. While protecting consumers, campaigners say the regulations are unnecessarily burdensome.
Commenting on the reforms, the Economic Secretary to the Treasury & City Minister, John Glen, 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.”
The plans come after the Government said capital market regulations would also be reformed to make Britain “an even more attractive place to invest and to do business”.
It is suggested that the changes will give firms “greater choice about where they can trade”, while a “new, simpler and more agile regime for companies listing and raising capital” will encourage more innovative firms to list in the UK.
To learn more about the insurance industry changes, click here.
Find the proposed capital market changes here.
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