LONDON, April 28 (Reuters) - Britain launched on Thursday a public consultation for a post-Brexit relaxation of capital rules for insurers, in a step the government said would increase investments in long-term infrastructure.
Britain inherited rules known as Solvency II from the European Union, and reforming them is seen by industry and government as a key component in keeping the country's financial sector globally competitive.
The long flagged proposals include a 60-70% reduction in the risk margin for long-term life insurers, a buffer that they hold in case they need to transfer policies to another insurer in a crisis.
The finance ministry said the proposed changes will maintain high protection for policyholders, and help attract new insurers to increase consumer choice.
"Our reforms will unlock tens of billions of pounds of investment in the UK economy, spur innovation in the market while protecting policyholders - and will cement the UK’s position as a global hub for financial services," UK financial services minister John Glen said in a statement.
The government also proposed a more sensitive treatment of credit risk in the matching adjustment, which provides incentives for insurers to issue long-term life insurance products by matching them against assets with similar characteristics.
The proposals also make it easier for insurers to invest in long-term assets like infrastructure, and cut reporting requirements, the ministry said.
The EU is also reforming the Solvency II rules and has already made formal proposals which it says will also unlock billions of euros for green investments. (Reporting by Huw Jones Editing by William Schomberg and John Stonestreet)
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