Solvency, too

David Little, Partner in Bishop & Sewell’s Corporate and Commercial Team

Here’s a clever wheeze – if you’re a government strapped for cash. 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, writes David Little, a Partner in the Corporate and Commercial department of solicitors Bishop & Sewell.

The UK has one of the most vibrant and innovative insurance sectors in the world. Yet the EU’s pre-Brexit insurance regulations were structured in such a way that insurance companies and pensions insurers, for example, had to hold huge reserves 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 Glen MP, 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…!

David Little is a Partner in Bishop and Sewell’s Corporate & Commercial team. Should you require any further advice or assistance, please contact him quoting reference CB302 on +44 (0)20 7079 4143 or email: [email protected]

About Bishop & Sewell LLP
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