Bank of England deputy governor Sam Woods has called for the government to ensure that insurers allocate up to £100 billion into the British economy after the recent relaxation of their capital regulations.
The UK is set to ease capital rules for insurers starting later this year, a move that the industry claims will free up around £100 billion for investment in infrastructure. However, there have been doubts among lawmakers about whether this capital will actually be used as intended.
The finance ministry took steps to ease certain capital rules beyond what Woods had recommended, potentially increasing the risk of insurance company failures. In response, lawmakers asked Woods if the Bank of England could monitor these investments to ensure the additional capital isn't diverted to pay dividends to shareholders or used for overseas acquisitions.
Woods explained that it would be outside the BoE's authority to direct insurers on how to allocate their investments. Instead, he suggested that it is the government's responsibility to oversee how the liberated capital is utilized.
Charlotte Gerken, the Executive Director for Insurance Supervision at the BoE, expressed optimism that the goal of investing £100 billion over the next decade appears feasible, particularly due to the accelerating transfer of liabilities from pension schemes to insurers. This shift means that insurers will have more funds available for investment, with infrastructure being a relatively small part of their current portfolios.