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How a change in government could impact the UK insurance sector

01 December 2023

With polls suggesting a possible shift in the UK's political landscape, the insurance sector braces for potential regulatory changes. Insurers must stay agile to navigate and adapt to these evolving dynamics while ensuring continued growth and stability within the sector.

The final instalment of DWF's 2023 InsureInsight event series took place recently at our offices in the heart of the City and brought together senior industry professionals to explore how a change in government could potentially impact the UK insurance sector.

DWF is politically neutral and does not take a position on the outcome of the next General Election. But with polling indicating a Labour lead, and the bookmakers making Labour odds-on favourites to secure a majority, it felt highly relevant to offer our clients a perspective on what a change in government could mean.

The event provided a platform for insightful discussion and strategic analysis, offering attendees the opportunity to gain valuable perspectives on how future Labour Party policies might introduce change should they win the next general election. Introducing the subject was Alice Perry, a former Chair of the Labour Party National Executive Committee and now a Director in UK Public Affairs at strategic consultancy H/Advisors Cicero.

Alice highlighted three topics on which Labour has stated policy objectives that could impact the UK insurance sector.

Solvency II

Shadow Chancellor Rachel Reeves has stressed Labour’s support of plans to revamp the EU's Solvency II regulations, recognising its potential as a lever to release significant capital for insurers to support economic growth. The Solvency II framework, designed to safeguard policyholders, has been criticised for imposing excessive capital requirements on insurers, impeding their investment in infrastructure and renewable energy projects.

Labour says that its support for reform underlines its commitment to fostering a flexible regulatory framework and proportionate approach to enable insurers to channel more capital into sustainable investments, job creation, and economic growth.

Green covered bonds

Alongside Reeves, Labour Leader Keir Starmer has engaged in discussions with key figures in the finance and insurance sectors to explore opportunities for providing banks, insurers, and other institutional investors with lower-cost and more secure options to finance or re-finance green projects, assets, or business activities.

One opportunity advocated by shadow City minister Tulip Siddiq is using the covered bond market, with talks underway with the FCA to see if current regulations can be amended to support the use of green covered bonds to enable capital-raising and investment for new and existing projects with environmental benefits.

Green investment

In his Labour Party Conference speech this year, Keir Starmer committed to "get Britain building again," as part of Labour's aim to drive economic growth, one of the five national missions expected to underpin its manifesto. Labour has also pledged to raise business investment as a share of economic output from 10% to 11%. To help achieve this goal, the party wants to unlock an extra £10 billion for investment in wind farms, hydrogen, and other green infrastructure projects. They say that this investment is expected to create thousands of jobs and boost the UK's economy while also addressing the UK’s energy infrastructure needs and supporting the country’s transition to a net-zero economy.

Effective engagement with political parties is crucial for shaping policy outcomes that align with industry interests. Clients can engage political parties by fostering direct communication channels with individual MPs and their advisors, as well as through sector groups and trade associations.

These interactions provide opportunities to present well-researched perspectives that resonate with the party's core values and policy priorities and by ensuring discussions have a clear purpose, clients can establish themselves as trusted partners in shaping policy decisions that benefit not only their businesses but also broader industry sectors.

DWF delivers market-leading solutions that optimise the claim management process, bringing together extensive insurance market and legal expertise with superior service and award-winning software to deliver bespoke strategies that manage risk, create greater efficiencies, and drive better decision-making.

Contact Global Head of the Insurance Sector Claire Bowler to discuss how you can support future DWF InsureInsight events.

Further Reading