Minister Advises Insurers: Investing in Britain is the Safest Bet

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British insurers have been urged by financial services minister Bim Afolami to utilize billions of pounds in freed-up capital to invest in growth companies and infrastructure, signaling a shift in regulatory policy following Britain’s departure from the European Union.

Despite opposition from the Bank of England, Britain has relaxed capital rules for insurers, which is perceived as a significant “Brexit dividend” for the financial sector. The aim is to redirect funds into investments for growth, aligning with similar reforms approved by the EU.

Afolami emphasized the importance of the insurance sector taking proactive steps to invest in the UK, highlighting it as a safe bet amid the regulatory changes. With Britain facing financial constraints, private sources of funds like insurers, pension schemes, and securities markets are crucial for financing green technology and infrastructure projects, which are often riskier than government bonds.

The Association of British Insurers (ABI) estimates that the capital easing could potentially release up to £100 billion over a decade for investment. However, Bank of England officials have called for oversight to ensure insurers are effectively investing the freed-up funds.

To address this, the ABI has established a “delivery forum” to collaborate with regulators in navigating complex investment areas and exploring new investment models for infrastructure projects.

Tulip Siddiq, the financial services spokesperson for the Labour Party, emphasized the need for active government involvement in maximizing investment opportunities from the capital released by insurers. This sentiment reflects a broader discussion on leveraging regulatory changes to bolster the financial sector’s global competitiveness post-Brexit.

Afolami acknowledged the need for continued evaluation of insurers’ adherence to the investment objectives facilitated by the regulatory reforms. The finance ministry is also considering new rules to encourage the establishment and growth of “captive” insurers, which could involve setting up in-house insurance subsidiaries to enhance coverage tailored to specific needs.