Tom Broughton reflects on Alistair Darling's position when he meets the ABI.

If he hadn’t realised it already, then after addressing the ABI board on Wednesday, Chancellor Alistair Darling will have had the extent of the challenge to keep British business happy brought clearly into focus. Insurers face an unprecedented set of drivers influencing their strategic decision making and how they structure their businesses. Whether it is sourcing capital, pan European tax and regulation issues, the credit crisis or climate change, these pressing demands are cumulatively forcing insurers to relocate, restructure and scrutinise their futures like never before. And that’s before even considering the single biggest headache of ensuring that they have enough human resource wherever they locate to service their needs. The Chancellor will know that the ABI wants reassurance from a government under pressure. And the main issue on the table is the government’s proposal for the taxation of overseas profits. This is the type of issue for business that could become as emotive as the 10p tax row, and the last thing it needs is to be hammered by a powerful business lobby. Darling will know that the insurance industry is already the third largest payer of corporation tax and perhaps explains why AXA boss Nicholas Moreau will lead the insurance lobby on the government’s working group to review corporate tax as a whole. There is an understanding from government that British business needs to remain competitive and insurers are seen as a front line of decision makers looking to redomicile. Any dialogue will be set against regulatory burden and the financial health of the UK economy as a whole and must be seen in this context. But it also comes at a time when the ABI is entering into negotiations about how the millions of new homes across the country on flood plains are to be insured. And with the flooding minister applying unnecessary pressure as to how insurers handled the fall-out of last summer’s floods, the argument over flood defence spending levels will become all the more ferocious. Darling becomes the first Chancellor to accept an invite to address the ABI board, he’s going to have to listen and negotiate expertly, or run the risk of losing the support of business.

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