Regulation must help drive growth not hinder it, the Association of British Insurers said today at a conference to discuss the new pan European set of rules, Solvency II.
The ABI warned that the Eurozone crisis would not hold up Solvency II, but the new rules for how insurers hold capital should recognise the need for investment in long term projects needed for economic growth, such as the UK Government's drive to secure funds for infrastructure projects.
Speaking at the fifth annual ABI Solvency II conference today, Tim Breedon, Chairman, Association of British Insurers will say:
"Solvency II is no mere technical exercise. It is one that comes with heavy social, political and economic responsibility. Solvency 2 must not unnecessarily drive up consumer prices or limit long-term investment. Getting this right is important not just to the insurance industry, but for many millions of our present and future customers, for financial stability in general, and for welfare systems and the broader economic health of member states across the EU. It seems to me that these responsibilities are even heavier today than they were a year ago. The environment is now more uncertain and more challenging than it was then, as the Eurozone crisis continues to unfold and economic growth forecasts are further reduced.
"We want the Government's plan to drive investment in infrastructure projects to work. This requires a Solvency II regime which enables us to invest for the long-term. It would be a technical and political failure for the UK and Europe more broadly, if we allow regulation to tie our hands and prevent us from playing our part tackling the recession."
Otto Thoresen, Director General, Association of British Insurers said:
"The volatility and outlook for the Eurozone, high levels of the UK's structural deficit and rising inflation all make for a toxic combination. Added to this, we have to tackle the implementation of the biggest capital requirements change to the insurance industry in our history, in the form of the Solvency II regime.
"Dealing with Europe's financial crisis is as much about investing for growth as it is austerity and cost reduction. As we have seen in the UK, a focus on growth is likely to be a major part of government policy across Europe in the years to come.
"While Solvency II absolutely must achieve its primary objective, of enhanced consumer protection, it cannot detract from the agenda to reinvigorate growth in our fragile economy. As we tackle the remaining policy and technical issues during the next twelve months, I hope that assisting growth, will remain at the forefront of both the European Commission and regulators minds."
Thoresen reiterated that insurers are committed to the implementation of Solvency II but he highlighted that there are wider implications for the financial markets that need to be thought through, as well as a need to ensure that Solvency II will deliver a better deal for pensioners and long term investors.
"We are seeking a balanced outcome to deliver an improved capital model for insurers. One which does not damage long term investment, or the UK's distinct annuity market. And one which allows the UK industry to deliver valued solutions to consumers."
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