British Finance Minister Rishi Sunak urged insurance companies on Tuesday to leverage billions of pounds of freed-up capital by reducing capital requirements, encouraging investment in growth companies and infrastructure.
Following Brexit, the UK eased capital rules for insurance companies, considered key to the financial sector’s “Brexit dividend,” in hopes of channeling funds into investment for growth, even though the EU also approved similar reforms.
Sunak added, “But trust me when I say, with these reforms… investing in the UK is the safest bet you can make, but you must take this step forward with us.”
Facing financial constraints, Britain must rely on private financing sources like insurance companies, pension systems, and securities markets to raise funding for green technology and infrastructure, which are usually riskier assets than government bonds and a key element in this sector.
The Bank of England stated that capital easing could free up to £100 billion ($126.83 billion) for investment over 10 years, but bank officials proposed that the Treasury ensure insurance companies invest the money.
The ABI association is working on establishing an industrial forum “to execute” investments.
The reform is part of a set of post-Brexit measures aimed at enhancing the global attractiveness of the financial sector, including a new task for regulatory bodies to consider the sector’s international competitiveness and growth when formulating rules.
Sunak acknowledged that there is still an “open question about whether they will respect the spirit of the goal.”
He said the Treasury is considering new laws “to encourage the establishment and growth” of “special” insurance companies, which create internal subsidiary insurance companies to provide better-designed insurance coverage for their needs, through a public consultation in the coming months.
