Solvency II reforms aim to unlock further capital for productive investment

The government has confirmed plans to reform Solvency II regulations in an effort to unlock investment in UK infrastructure from the UK’s insurance sector, with industry experts urging the government to introduce the reforms "without further delay".

Speaking at the Association of British Insurers (ABI) annual dinner, Economic Secretary to the Treasury, John Glen, announced plans to reform the EU-focused regulation to become “UK-focused, agile and easily adaptable”.

“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,” he stated.

“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 have been welcomed by industry experts, with Pension Insurance Corporation (PIC) CEO, Tracy Blackwell, suggesting that these changes should help channel "billions of pounds" into areas like social housing and urban regeneration from long-term investors, such as PIC, whilst also securing the pensions for policyholders "for decades to come".

“However, we will wait to see the final detail of the reforms and we will be responding to the planned consultation to help ensure that we really seize this opportunity to improve lives across the country," she added.

In addition to this, Blackwell argued that the reforms should be implemented “without further delay”.

“Discussions about reforming Solvency II have been going on for years and it is noticeable that the Europeans are moving ahead with their own reforms," she continued.

"The life chances and financial security of millions of people across the country depend on the timely and successful reform of this key piece of financial services regulation.”

This sentiment was echoed by Legal & General Retirement Institutional (LGRI) CEO, Andrew Kail, who noted that whilst Legal & General has already more than £30bn targeting those areas of the UK that need it most, this is "just the start".

He stated: "An overhaul of pension sector regulations will enable to us accelerate further investment around the country, delivering our purpose of ‘inclusive capitalism’ to all our communities.

“It is now key that these reforms are implemented in good time. Pension Risk Transfer is one of the fastest growing sources of UK investment with immense potential for future growth and we want to see that unlocked as soon as possible.

"We must not lose this opportunity to transform our economy for the better by unleashing the full power of pensions.”

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