Cut EU-era red tape and use pension billions for levelling up, says Aviva

The Chancellor should take the opportunity to overhaul EU red tape so insurers can take advantage of Brexit and fund an infrastructure revolution in the regions, the boss of Aviva has said.

In her first public comments on reforming the Solvency II rulebook since taking over the FTSE 100 giant, Amanda Blanc, chief executive, said: "The old European solvency rules created certain barriers to…long-term investment, but Brexit has provided the opportunity to change that.

"If done right, this will be good news for savers and good news for much needed UK investment. It is time to make sure that we can put our country’s hard earned pensions funds to positive national use.”

Solvency II forces insurers to hold vast sums of money on their balance sheets and was introduced in 2016 following years of negotiations in Brussels. 

The rules were adopted by ministers once the UK left the EU, but Rishi Sunak, the Chancellor, is reviewing the rulebook to determine whether it can be relaxed to boost British insurers and increase investment. 

Ms Blanc added: "The UK pensions industry is a massive home grown advantage with up to £1.5 trillion to invest. 

“UK insurers like Aviva can play an even bigger role in supporting the UK economy by investing more of that in the country’s essential infrastructure – the colleges, hospitals, transport and renewable energy, which are critical to our future.”

Insurance has been tipped for years as an industry that could benefit from relaxing the EU rules introduced to make financial institutions safer after the 2008 financial crash. 

Industry bosses have complained that they are forced to hold a disproportionate amount of capital in an ultra-low interest rate environment, tying up billions of pounds of assets that could otherwise be invested in the real economy.

As part of the Government’s so-called “levelling up” agenda, ministers want domestic insurers and pension funds to invest more heavily in the UK, amid concerns that projects are increasingly being bought up by foreign wealth funds.

But UK bosses argue that they are limited in what they can do under the current capital requirement regime. 

In August, Boris Johnson and Mr Sunak wrote to UK institutional investors urging them to launch an “investment big bang”. 

They said: “It’s time we recognised the quality that other countries see in the UK and back ourselves.” 

Last month, Bank of England Governor Andrew Bailey also criticised the current solvency rulebook, saying it was “never well suited” to the UK market and it threatens the financial soundness of insurers and the protection of policyholders. 

A longstanding critic of the old EU regime, Mr Bailey added that the rulebook is “cumbersome”, “slow moving” and involves significant costs.