Hm Treasury
Keynote speech by Andrew Griffith MP, Economic Secretary to the Treasury, at the ABI Annual Conference
Thank you, Louise good afternoon everyone.
I was with you for the inaugural ABI Climate Summit as the UKs Net Zero Business Champion and its a pleasure to be back speaking to you again today as City Minister.
The UK is a world leader in the insurance sector with a pioneering history.
Weve come a long way since the since the Great Fire of 1666 and setting up the first fire insurance market.
Today we have the fourth largest insurance sector in the world, the largest in Europe, managing around 1.7 trillion worth of investments and employing hundreds of thousands of people, right across the nation.
So let me place on record the thanks of all of us in government for everything that the insurance sector does.
Like you, I want us to be an innovative, business-friendly and agile economy.
Like you, I want us to deliver broader economic growth, that is inclusive of everyone wherever in the UK they live and work.
And like you, I want to harness our capability to work together to tackle the great national and international issues of our age, from an ageing society and the genomics revolution to saving nature and adapting to a changing climate.
As Hannah said in her speech at your annual dinner last night, the insurance industry is not a fair-weather friend.
You take care of those struck by disaster.
You take care of those who lose their jobs.
You take care of those who have fallen ill.
And you help people take care of themselves when they retire.
Business is never as some say, part of the problem - but you are absolutely part of the solution.
Before I talk a little more about our plans for the sector, let me talk about the wider economy.
I know we still face challenges.
And true to my former finance director self, a degree of caution as we plan for the year ahead is wise.
But we should keep our performance in an international context.
Yes, we have some headwinds particularly in the cost of energy - but so too does most of the western world.
Yes, we have not yet returned to pre-pandemic employment or output levels. But despite a global pandemic we have nearly the lowest unemployment for half a century.
Yes, inflation has risen, which is why the Prime Ministers first priority is to halve inflation this year, but it is still lower than 14 EU countries.
And while our public sector recovers more slowly than we would like from the pandemic strengthening the need for reform the private sector has grown 7.5% in the last year.
No room to be complacent but neither should we fall into the trap of believing those that say decline is inevitable.
It was wrong when they said it in the late seventies, and it is wrong now.
In just 80 days time we will celebrate the Coronation of His Majesty the King.
Its a good reminder of the unique strengths of our country.
The strength of our democratic institutions and the long history of the peaceful transfer of power.
Our ties to the Commonwealth which alone covers a third of humanity.
The rule of law, the English language, and indeed great global capabilities such as the firms represented in this room.
Its why you can be confident that our best days lie ahead.
And be in no doubt that this government has a clear vision for the UK as an enterprise culture built on low taxes, reward for taking risks, access to capital and smarter regulation.
Sound money must come first but our ambition is to have nothing less than the most competitive tax regime of any major country.
For financial services, taking back control of our rule book from Brussels has given the UK a unique opportunity and a moment in time to do things differently: To be the worlds most innovative, open and competitive global financial centre.
Our Edinburgh reforms take that ambition forward. It is a comprehensive package touching many of you here.
Reforming bank ring fencing, holding the regulators to account for improving the speed of authorisations, reforming MiFID streamlining the senior manager regime and removing the pensions charge cap. Just some of around 30 measures to make us more competitive.
The common theme here is that this government has a philosophy of regulation which is simple and proportionate.
Having been in business and having worked in financial services I know you cant have regulations or regulators who simply try to remove all risk.
Solvency II is a perfect example of our approach.
We worked closely with ABI members throughout, listening to the voice of practitioners.
There were plenty of naysayers and it would have been easy not to make any change.
But we are 100% committed to delivering the reform package we have announced to let you use your investment firepower to deliver as an engine for national dynamism whilst maintaining policy holder protection.
Reducing the risk margin will unlock currently unproductive capital, opening up the potential of lower product prices and higher annuity yields.
Broadening matching adjustment eligibility will make it easier to invest for the long term in projects even when there is a construction phase - whether building housing, wind farms or town centre regeneration.
Good for returns and good for society.
To be candid, this is an issue that goes far beyond this sector.
The combination of overly prudent regulation and mark to market accounting standards mean 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 and pensioners.
Its something that the Chancellor and I are focussed on as we look to help Britain be a start-up and scale-up superpower.
In the case of Solvency II, it was helpful that, again working with you, we were able to communicate clearly what benefits will flow.
One hundred billion of additional investment in productive capital over the next ten years.
I welcome ABI members offer to help the Government in tracking this investment. We have a shared interest in demonstrating the sectors commitment to society and being able to talk about it publicly.
As a sector you have a proud tradition of innovation.
We all face transformational technological changes over the coming decades from trends such as advanced analytics, cloud computing and artificial intelligence.
To maintain our international competitiveness, the UK must embrace the potential of these shifts and focus our attention on growth and innovation in the sector.
These developments present opportunities across the industry, as risk modelling becomes increasingly advanced.
And with the wider sector, UK insurtechs are also rising to this challenge.
The UK has the largest insurtech sector in Europe. In fact, in recent years the UK has received as much investment into its insurtech sector as the rest of Europe combined.
In 2021 alone, it raised over 770 million in investment.
Firms are harnessing technological innovation, such as sensors to help people in flood-risk areas access insurance, smart contracts to deliver better outcomes for businesses and consumers, and perfecting artificial intelligence to improve claims processes after an accident.
I look forward to working with you all to continue to support growth and innovation across the sector, helping ensure the UK insurance sector remains world leading.
Finally, I want to talk about your contribution to society.
Last time I was here I was banging the drum for businesses transitioning to net zero. And I know that you are taking a leading role in tackling climate change.
It is but one example of how you are pivotal to some of the biggest challenges in society.
Take ageing.
Nearly nine hundred thousand enquiries have been made by older citizens since the Government committed to the Age Agreement with the ABI along with the British Insurance Brokers Association to provide them with improved access to motor and travel insurance.
Ensuring we have the right social care system is one of the grand challenges of our time.
Sad to say, a majority of us will develop a care need in our lifetime and, according to the ONS, in 50 years time the number of people older than 65 is likely to grow by more than 8 million.
Thats approximately the size of Londons population.
While the Government has taken the difficult decision to delay charging reform to help local authorities meet current pressures; we remain committed to this agenda. And insurers and long-term savings providers are fundamental to delivering a step change in the way people plan and pay for care.
Were also working together on the Flood Insurance Directory and the Financial Inclusion Policy Forum, so that everyone can access the insurance policies they need.
Let me conclude by again commending the work of the ABI, your members and the whole insurance in supporting policy holders, the economy and wider society.