Osborne accused of 'complacency' over Solvency II

Labour’s financial services spokesman Chris Leslie has accused the government of complacency over its handling of the Solvency II negotiations.

In an article on the Solvency II Wire website, Chris Leslie writes that Chancellor of the Exchequer George Osborne has yet to indicate a “coherent stance” on the directive.

“Given the size of the UK insurance industry (it is the largest in Europe) and its well developed annuity market the UK should be playing a key role in these discussions with a coherent government policy leading the, way.”

Leslie adds there is “far too little discussion of Solvency II in Parliament”.

“There is a sense that Solvency II is an obscure technical Directive that is confined to the insurance industry. The government is failing to recognise the real impact Solvency II may have on British consumers and the economy as a whole. Simply leaving it to Europe, or the insurance industry alone, will not do.”

“There is a danger that setting the capital requirements in the wrong way could result in “prudence on top of prudence”, creating regulations that might unfairly increase costs and reduce cover to policyholders. Furthermore, there could be unintended perverse consequences that harm investment in UK corporations.”

“Solvency II could also have profound effect on UK corporate funding,” Leslie adds.

The Nottingham MP points to concerns that the directive could lead insurance firms, which manage assets equivalent to 24% of the UK’s total net worth, to shy away from long-term debt and low rated corporate bonds.

“A shift out of corporate debt could have serious consequences for investment in British business.”