UK Insurance: General (5 December 2016)

Financial crime, HM Treasury, Investments, Life insurance, Non-Life, PRA / Bank of England

05 December 2016

Selected recent UK news items of more general interest:

On 1 December, the Office of Financial Sanctions Implementation (OFSI), part of HM Treasury, published a consultation "seeking views on guidance which will set out the approach to imposing monetary penalties for financial sanction breaches".

The outlook for UK financial stability remains challenging according to the Bank of England's latest Financial Stability Report (published 30 November). The summary added "The UK economy has entered a period of adjustment following the EU referendum. The likelihood that some UK-specific risks to financial stability could materialise remains elevated." A section of the report ("Risks to financial stability from insurers’ investment behaviour") repeats concerns that the sensitivity of the Solvency II risk margin incentivises procyclicality (i.e. "reinforce falls (rises) in risk-free interest rates by switching into (out of) low-risk assets"). The bank also notes risks to market liquidity from unit-linked insurance products in respect of the same behaviour are such that they warrant inclusion in their system-wide stress simulation.

In a letter dated 29 November, HMT confirmed to OAC that the MPC will continue to set monetary policy to target inflation of 2 per cent, as measured by the CPI. As per our publication on 14 November, the ONS intend to make CPIH the preferred measure of consumer price inflation from March 2017. 

On 28 November, HMT published the UK's response to ESRB's warning regarding financial stability risks in the residential real estate sector of the UK. The Chancellor's letter states "The FPC will continue to monitor the UK real estate market and will take action, if necessary, to address any potential financial stability risks it identifies." 

On 25 November, GAD published a technical bulletin looking at measures announced at the Autumn Statement relating to pensions, savings, insurance and social security.  

David Gray

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David Gray
Consultant Actuary

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