Watchdogs (Industry and Regulators Committee Report)

Lord Ashcombe Excerpts

Monday 9th September 2024 Lords Chamber

[Lord Ashcombe (Con)]

My Lords, I am delighted to be able to take part in this debate, but before I start I should declare my interest as an employee of Marsh McLennan, the insurance broker. I thank the noble Lord, Lord Hollick, and his committee for this report and believe that nothing but good can come from this debate around the performance, independence and accountability of the UK regulators. I know that it was welcomed by many within London’s commercial insurance and reinsurance markets.

The committee’s report was particularly welcome in the context of the Financial Services and Markets Act 2023, which established a number of new accountability metrics and mechanisms, including a secondary objective for international competitiveness and growth for the FCA and PRA. These two regulators are now required to publish annual competitiveness and growth reports, the first of which were published in late July. These reports represent an important step forward and illustrate how the new accountability measures introduced are starting to engender a culture change in these regulators. Time will tell of progress. They also provide an opportunity for noble Lords, via the Financial Services Regulation Committee, to scrutinise the performance of these two regulators.

To take advantage of dynamic changes, businesses need to be able to respond swiftly to new opportunities and risks. They will have many choices about how and where to do that, so the speed, responsiveness and willingness of the regulators to support these innovations are vital factors. If London is to remain the global centre of risk transfer and retain its reputation for innovation, it needs to be able to offer customers all the tools available—tools used in competitor jurisdictions.

The noble Lord, Lord Hollick, touched on two topics, captive insurance and insurance-linked securities, which I would like to go a little further on. I am particularly interested in the potential of captive insurance, a rapidly growing global market estimated by Marsh McLennan to reach $161 billion by 2030, and of which the UK has no share. Core to its success will be the approach by the regulators; the regime needs to be designed and structured in a balanced and proportionate way. I urge the regulators to learn from their experience of the ILS market, an area where the UK market has broadly stalled—unlike Singapore, which copied the UK’s framework in 2019, since when 28 transactions have been launched thanks to the proactive work of its regulator, the MAS.

I welcomed the inclusion of a consultation on the creation of a UK captives regime in last year’s Autumn Statement. I understand that significant progress had been made prior to the general election about that consultation nearing publication. Pressing ahead and establishing the UK as a relevant captive domicile would mean that the UK could take advantage of a market that is growing rapidly, contribute to growth and bring back taxpayer capital currently held in the captives of UK public bodies based offshore. I hope that this House will continue to review these essential topics in the years to come. We have an important part to play in making the FCA and PRA fulfil their primary and secondary objectives.

I finish with two questions to the Minister. First, does she agree that, given that a number of UK public sector bodies currently base their captives offshore, the creation of a UK regime would be a positive step in bringing back taxpayer capital to the UK? Secondly, can she provide the House with an update on the Government’s work in preparing a consultation on the creation of a UK captives regime and, furthermore, will she prepared to meet me and other noble Lords interested in the potential of this market, to seek our views? We all want growth, with the UK economy thriving and driving our nation’s prosperity.

Trade (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) Bill [HL]

Lord Ashcombe Excerpts

Committee stage
Thursday 14th December 2023 Grand Committee

Those who have spoken on these measures are extremely knowledgeable and understand the risks for our own safety and that of our animals. Border control is clearly not fit for purpose at the moment. I fully support the comments of those who spoke before me, and I look forward to the Minister’s positive response.

[Lord Ashcombe (Con)]

My Lords, I wish to return to our invisible trade and speak in support of Amendment 13, on inward investment, and Amendment 14, on financial services trade, tabled by my noble friend Lord Holmes. I declare my interests as an employee of Marsh Ltd, the insurance broker.

There are significant advantages of being part of CPTPP in its early stages and being able to influence the shape and development of many aspects of the treaty, in particular financial services. To get the most from membership, we need to develop trade strategies that play to our economic strengths and ensure that we are working to remove barriers to cross-border trade that could benefit the UK.

I will take the two amendments in reverse order—it may be my upbringing in Ireland. The assessment proposed in Amendment 14 would inform a strategy about how the UK Government, working with our regulators, could seek to expand partnerships with CPTPP markets and address market access barriers, which would expand growth opportunities for UK financial services. In particular, the assessment should look closely at the regulatory barriers within certain CPTPP countries. They are set out within Annex III of the treaty, which lists the domestic barriers to cross-border financial services trade.

We need to consider how we can reduce those barriers, to the benefit of both the UK and our new partners. For example, the Government have rightly identified Malaysia as a crucial trading partner. Malaysia is much in need of the kind of support our world-class financial services businesses can offer. The London insurance market could play a major role in helping the country to protect itself against the increasing threat of cyberattacks. Malaysia has fallen victim to an increasing number of such attacks. Indeed, 62% of Malaysian businesses have put off digital transformation efforts due to fear of cyberattacks.

The UK’s commercial insurance industry is made up of global innovators when it comes to protections against these risks. However, Malaysia has an extremely protective, complex and restrictive insurance regime to be navigated before permitting offshore reinsurers to be offered a risk. Many other CPTPP countries operate with differing restrictions, making it hard for UK markets to trade. Reducing these barriers would help treaty countries such as Malaysia to reinsure their risks through London and out of the country, taking advantage of the global insurance capital that London can access and thereby gaining better protection by spread of risk. It is not just cyber risk; we can help protect from a myriad of other exposures as well. These are the opportunities that are on offer, and Amendment 14 would give us a plan and a set of priorities to consistently pursue.

I turn to Amendment 13. Growing cross-border trade and encouraging inward investment are two sides of the same coin. We must ensure that the UK is a welcoming, agile, easily navigable place to do business, and use the opportunities that agreements such as CPTTP bring to really sell what the UK has to offer to our trading partners.

My noble friend Lord Harrington’s review of foreign direct investment is a very welcome addition to this debate. His recommendations for a business investment strategy, for our regulators to be much more focused on inward investment, and for a consistent government strategy towards encouraging investment are all applicable to financial services and would greatly enhance our offer to CPTPP investors.

This is an approach that other CPTPP members are actively pursuing. As my noble friend Lord Holmes mentioned, the Monetary Authority of Singapore has a team dedicated to growing Singapore’s share of global industry, separate and distinct from regulatory colleagues but providing a joined-up and seamless service to those seeking to invest, create jobs and support growth. Another example is the Singapore College of Insurance, which is regarded as the most powerful insurance qualification in the Asia Pacific region, extending Singapore’s influence and shaping markets. Ours are extremely well thought of as well and should meld in. Australia is also looking ahead and has been growing its influence in the region, having signed a free trade agreement with Indonesia in 2020—a potential future and very significant member of the CPTPP.

Both these amendments would therefore help to ensure that we can take full advantage of being part of this living agreement, which is likely to be significantly developed in the years ahead. We need to prioritise the areas where we are economically strong and use our expertise to the benefit of our economy.

[Lord Davies of Brixton (Lab)]

My Lords, I have a quick question for the Minister arising from Amendment 14. I need to declare an interest in the context of professional qualifications, and as a fellow of the Institute and Faculty of Actuaries. I heard what the noble Lords, Lord Holmes and Lord Ashcombe, said about the potential for financial services. There is a very big debate to be had on that, but at table 5, on page 46 of the impact assessment, the percentage change in trade shows a decline in the UK’s financial services and an increase in imports of financial services. Maybe the Minister could help the Committee by reconciling what the noble Lords said and what the impact assessment is telling us.