Partnerships between the government and investors, rather than simply relying on investing in infrastructure, are important to maximise the benefits of the reforms of Solvency II in the UK, according to shadow chancellor Rachel Reeves. 

The Treasury has said the reforms could help insurers generate £100bn over the next 10 years to invest in projects such as UK social infrastructure.

 

The Labour MP for Leeds West is supportive of the reforms but stressed that, while it is important to invest in projects, this cannot be achieved without partnering with the government. 

Speaking at the annual conference of the Association of British Insurers on Tuesday, she said: “We want to make sure that the money from pension savers and particularly defined benefit pension schemes can be invested in these opportunities. But also the government can't just pass this legislation and then say, ‘Now over to you, make this work’. There needs to be a partnership approach.”

Reeves added: “We can only achieve those things if that investment is happening, and work together to identify what the big opportunities are out there.”

Apart from infrastructure, she cited investment opportunities such as investing in startups. 

At a panel earlier that day, Tracy Blackwell, chief executive of Pension Insurance Corporation, said there are not enough infrastructure opportunities for insurers to invest in. 

In response to this, Reeves said she was “really frustrated” that this was how investors felt, given the need for infrastructure investment across the UK.

“One of the things that I announced at the Labour Party conference last year as part of Labour's green prosperity plan is the creation of a national wealth fund to invest alongside business in the opportunities in some of the green industries of the future, [such as] carbon capture and storage, small modular reactors, green steel, green hydrogen, batteries for electric vehicles,” she said.

“It's not something that the private sector can do on its own, but it's also not something that the public sector can do on its own. It will take a partnership approach.”

In a separate speech, city minister Andrew Griffith also recognised the benefits of the reforms, which would “unlock currently unproductive capital, opening up the potential for lower product prices and higher annuity yields” but added his approach was to ease regulations to make it work.

“If I can be candid for a moment, this is an issue that goes far beyond this sector. The combination in the UK of overly prudent regulation and mark to market accounting standards means far too much UK capital is trapped in short-term, low yielding investments. The resulting performance penalty is not serving the needs of British investors or pensioners,” he said. 

“We are consciously trying to embrace the concept of people understanding and accepting risk, and you can't protect and litigate against every single risk. You have to have a financial and a political system that makes peace with that,” Griffith argued.

As part of the financial services and markets bill, Griffith has already told regulators that he would like to see changes in operational aspects such as the pace of authorisations and routine work.

“Sometimes people say understandably, ‘I don't even care what the answer is… But the one thing I really want is my business is moving at speed and I need those decisions quickly and clearly’. So that is a point that I've made to the regulators in fairness.”