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CII Thinkpiece 67

Insurance Regulation in 2012: Finding Solutions to the British Dilemma

Much of the discussion in recent months about the reform to the UK's regulatory architecture, and indeed UK financial services generally, tends to be about banking matters. However this country's dominance in the global insurance markets both retail and wholesale cannot be underestimated, and any regulatory reforms must be reflective of the unique issues in this sector. In this Thinkpiece, Mark Hoban, the Financial Secretary to the Treasury offers the Government's views on domestic and international insurance regulation.

Summary:

- Insurance companies face tough challenges, but there are opportunities for the UK insurance sector to build on its world leading strengths.

- As we reform our financial services, we are caught in what the Chancellor described in his Mansion House speech as "the British dilemma": we want a strong, vibrant and successful financial sector to support economic growth; but we cannot afford the sector to pose a risk to the stability and prosperity of the rest of the nation's economy.

- Government is conscious of the inherent and unique characteristics of an insurance business model. The new PRA will bring judgement to the vital task of regulating firms which manage risk - and, recognising the differences between insurance and banks, the Government is proposing to provide the PRA with a specific statutory objective for its insurance responsibilities.

- On the subject of international regulatory reform, the uncertainty surrounding events such as the Eurozone crisis must not undermine the need for integrated financial sector reform. Government believes the new EU regulatory architecture and initiatives like Solvency II will help to promote stability and certainty.

- Finally, we are actively committed to creating a retail savings and investment landscape that creates the incentives for people to address their future needs, not just in retirement but also through life, and are engaging the industry to create adequate solutions.

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