UK government in pre-negotiations with regulators on insurance capital reform

The UK government is nearing agreement with regulators on an insurance capital reform aimed at freeing up billions of pounds of investment in the economy.

Treasury Secretary Jeremy Hunt plans to release details as part of Thursday’s fiscal report if negotiations are finalized in time, according to people familiar with the matter.

The Treasury Department hopes to reach an agreement with Prudential regulators on Solvency II rules after months of conflict between the two sides over how far deregulation should go. One of his sources said those talks could still fall apart.

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Ministers have called on insurers to be able to allocate more capital to areas such as infrastructure and climate change. The PRA warns that relaxing restrictions on where insurers can invest could put future policyholders at risk.

The two countries have recently become closer, according to people familiar with the matter. One of his sources said the industry is now prepared for deregulation not to go as planned.

A Treasury spokesman said: “We are committed to delivering ambitious reforms to the UK financial services sector, including Solvency II rules.” “We will reveal more details in due course,” the PRA declined to comment.

Further reform

Hunt announces a series of reforms aimed at boosting the City of London as the government strives to show Britain’s growth potential even as it battles a huge fiscal hole. We are preparing. This statement is expected to be dominated by a wide range of tax increases and spending cuts.

Other policies likely to be picked up on Thursday are the rollback of EU rules that require fund managers to pay analysts for their research. That would allow banks to bundle research with other services and increase investment in small businesses, with the aim of stimulating investor interest, the people said.

There are measures to step up reforms in the UK’s fintech sector and capital markets, which could entice fast-growing foreign companies to list in London, the people added.

The government is also working on a plan to give regulators intervention powers in financial services and markets bills passing Congress.

The Treasury initially raised the possibility of call-in power last year as a way to sway the PRA over Solvency II reforms. Participation pledges could be watered down or withdrawn if a deal is finally reached, the people said.

Measures to change Solvency II (EU rules introduced across the bloc including the UK in 2016) should also be included in the Finance Bill. The draft is expected to become law by the spring.

– With help from Alex Wickham.

Photo: UK Treasury Secretary Jeremy Hunt on 26th October 2022. Photo Credit: Chris J. Ratcliffe/Bloomberg

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