One of the consequences of the UK being a member of the EU was that some of the financial regulations that were relevant to several European countries didn’t translate very well across the Channel. The UK has one of the most vibrant and innovative insurance sectors in the world for example, writes David Little, a Partner in our Corporate and Commercial department.
Yet the insurance regulations were structured in such a way that insurance companies and pensions insurers for example had to hold assets on deposit, in order to secure the robustness of their balances sheets, rather than invest all their money. The sector, and the City of London in particular, is a world leader in the provision of complex and bespoke forms of insurance and reinsurance.
This week the City Minister, John Glenn, or to give him his full title, The Economic Secretary to the Treasury, announced a consultation setting out the Government’s package of proposed reforms to the prudential regulatory regime for insurance firms, also known as ‘Solvency II’.
It’s interesting stuff, and the stakes couldn’t be higher.
For a government that has borrowed and borrowed and borrowed the only way to build and ‘level up’ areas of the UK that need regenerating is to go to the institutions who have cash. And pension funds and their insurers have billions. Solvency II prevents them from splashing out. For the present.
By the government’s own maths they reckon the reforms could result in a material release of possibly as much as 10% or even 15% of the capital currently held by life insurers and unlock up to £90 billion for long term productive investments, including infrastructure.
Of course, corporate lawyers are going to crawl all over the fine detail. How will policyholders’ pensions stay protected? How will the regulators regulate in future? How many EU-derived regulations will be trashed?
If you’d like to submit your opinion the consultation is open until the 21 July.
You can view more here. Interesting times.
Contact our Corporate & Commercial Team
David Little is a Partner at Bishop & Sewell in our expert Corporate & Commercial team. If you would like to contact him please quote Ref CB309 on either 020 7631 4141 or email company@bishopandsewell.co.uk.
The above is accurate as at 28 April 2022. The information above may be subject to change during these ever-changing times.
The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.
