Insurance sector needs to be given "priority" status in Brexit talks, says influential MP committee

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Nicky Morgan has previously called insurers the "Cinderella of UK financial services". (Source: Getty)

Treasury select committee chair Nicky Morgan has called on the government to treat Britain's insurers as a "priority sector" during Brexit negotiations.

The influential group of MPs today publishes a report on the impact of a key European directive that shook up how much capital insurers must hold to cover any losses.

Morgan called on Prudential Regulation Authority (PRA) to hold a "pragmatic discussion" with insurance firms.

“The UK insurance industry managed investments of over £1.9 trillion in 2016 and paid nearly £12bn in taxes to the government. We should not ignore the consequences of Brexit on this important UK industry, nor the way that it is regulated irrespective of Brexit," said Morgan.

The Tory MP repeated the notion that insurers are too often "treated as the Cinderella of UK financial services".

She said:

This important UK industry should be regarded as a priority sector during the Article 50 negotiations.

Read more: Insurers facing £2bn boost after discount rate U-turn

Solvency II

Previous committee chair Andrew Tyrie launched an inquiry into the Solvency II European directive in September 2016. The rules sought to harmonise how much capital insurers had to hold to cover the risk of insolvency.

Morgan said Solvency II had come at a "considerable cost" to the insurance sector.

She added: "Industry and the PRA do not appear to be aligned on some key issues, including the impact on consumers. They should agree what is best for UK industry and consumers as a matter of urgency.

“They should develop a roadmap that provides a prudent regulatory structure without stifling competition and innovation.

“Such a roadmap should both inform the Brexit negotiations and reflect the opportunities afforded post-Brexit to develop the international competitiveness of the UK insurance industry.”

A spokesperson for the PRA said: “We are grateful to the Treasury Committee for examining these important issues, we will give the findings careful consideration and we look forward to providing a progress report as requested by the end of March 2018”.

Insurance trade body the Association of British Insurers welcomed Morgan's comments on prioritising the sector.

“The committee is right to recognise the importance of successful Brexit negotiations for our world-leading insurance sector which serves millions of individual and business customers across the EU. It is vital politicians allow regulators to agree on a process to handle pre-Brexit contracts and that the PRA is allowed to help EEA businesses operating in the UK have certainty on their regulatory status after March 2019, " said ABI director general Huw Evans.

Meanwhile, a spokesperson for the department for exiting the EU said: “On leaving the EU, we are determined to deliver an outcome that is good for the whole economy and all parts of the United Kingdom.

"We are keenly aware of the importance of the financial services sector to both the London economy and the UK economy, which is why we have set out our intention to pursue a bold and ambitious free trade agreement with the European Union that covers sectors crucial to our linked economies such as financial services."

Read more: Breath of fresh air for Treasury committee