Insurance ’is one of the industries that can make the biggest difference in terms of investment to grow our economy,’ says City minister
Financial regulatory reforms such as Solvency II will only be ”effective if they are taken advantage of” by the insurance sector.
That was according to Bim Afolami, economic secretary to the treasury and minister for the City.
Speaking during his keynote address at the ABI Conference 2024 today (27 February), Afolami explained: ”My mission, and the Chancellor’s mission, is to build an open, competitive and innovative regulatory environment in which industries like insurance, which is uniquely British strength, can thrive.”
The government’s regulatory reforms for the country include Solvency II reforms, which would reduce the risk margin for general insurance businesses by 30%, as well as introduce a modified cost of capital approach for this calculation.
Current Solvency II regulation requires insurers to hold a solvency capital ratio (SCR) of at least 100%, meaning they must hold eligible assets in reserve to the value of 100% of what they could be liable to lose over the next year.
The government’s plan to lower this threshold by 30% would mean that insurers would only be required to hold a SCR of 70%.
Afolami explained: ”Our insurance firms have handed you the keys to opportunity and now is the time to unlock it.”
Promoting investment
The intention behind the government’s Solvency II reforms has been to promote investment in UK.
Read: UK government sets out final reform plan for Solvency II
Read: Briefing – Regulation pulling the sector this way and that
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During his speech, Afolami explained: ”The point of these reforms is to promote more investment into the communities in this country and our economy.
”That isn’t charity, but it has a positive social good and the work that you will do to take advantage of these reforms will make a positive difference to our country, both economically and socially.”
However, Afolami highlighted that this work could only be completed with buy-in from the industry.
He noted: ”[The insurance] industry is one of the industries that can make the biggest difference in terms of investment to grow our economy.
”These reforms are only effective if they are taken advantage of by you. There’s no point in changing the rules, speaking to the regulator and doing all these things if you don’t take advantage of it in the best way that you can.”
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