Labour’s shadow business secretary has said he is in favour of scrapping the EU’s Solvency II directive post-Brexit in a bid to free up insurance firms to plow tens of billions of pounds into the British economy.
Jonathan Reynolds said today at a UK Finance event that there was “an argument, not for deregulation, but regulation that would better free up capital for firms to make investments”.
A government taskforce last year estimated the retained EU law – which makes insurance firms hold a certain amount of capital to ensure they can survive potential economic shocks – is holding back £95bn of investment into the British economy.
Rishi Sunak is currently considering a package of measures to shed EU financial services regulation post-Brexit, with the chancellor now expected to bring forward his proposals later this year.
It is understood that the capital requirements for insurance firms in Solvency II are set to be eased as a part of efforts to cut red tape and make the City more competitive post-Brexit.
Reynolds’ intervention comes as Labour continues to signal its shift away from the far-left policies of Jeremy Corbyn and John McDonnell.
“When I was ever asked ‘what do you think a potential benefit of Brexit might be’, I would often cite Solvency II as something we could have done better,” Reynolds said.
“I think there is an argument, not for deregulation, but for regulation that would better free up capital for firms to make investments.”
This stance was welcomed by the Association of British Insurers, with the lobby group commenting that Brexit “has provided an important opportunity … to seize the chance to enable our sector to provide further investment in the UK’s economic growth and transition to net zero”.
The British insurance industry has just under £2 trillion of assets under management and is the largest in Europe.
Bank of England governor Andrew Bailey last year said the Solvency II rule was “never well suited” to the UK’s insurance industry and called it needlessly “cumbersome”.