Draft Civil Liability (Information Requirements) and Risk Transformation (Amendment) Regulations 2020

Anneliese Dodds Excerpts

Tuesday 10th March 2020 General Committees

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

It is a real pleasure to serve under you in the Chair, Ms Nokes. This is my first time on a Committee that you are chairing, so thank you very much. I am also grateful, as always, to the Minister for explaining the regulations. As he mentioned, insurance is of course incredibly important for the City and the whole country. I understand that the UK insurance market is the fourth largest in the world; it is the largest in Europe by some way. We account for an estimated premium volume of just under £220 billion, according to the latest figures, which are from 2017. It is therefore essential that we get regulation right. In that regard, I am pleased that the Government seem to have listened to concerns set out by hon. Members and others, including consumer groups, and chosen to amend the Civil Liability Act 2018 to try to ensure that insurers pass on to consumers any savings generated from the changing calculation of the personal discount rate.

As the Minister mentioned, part 2 of this statutory instrument establishes that insurers should provide the FCA with figures on their premiums, as well as the total value of all claims. That information would then be crunched by the Treasury to work out whether savings are indeed being passed on to consumers. I have two quick questions on that. The regulations do not set out any penalties for non-compliance, so it might be interesting to understand what would happen if that reporting did not occur. I suppose the converse of that is this. Sometimes I sit in these rooms and wonder whether legislation is always the right way to deal with an issue. Has this matter come before the Committee because attempts to informally gather that information have not met with support from the insurance industry? It would be interesting to hear about that.

As the Minister also described, the third part of the instrument amends the Risk Transformation Regulations 2017. Those of course implement a comprehensive UK regime for insurance-linked securities business, in line with the requirements of directive 2009/138/EC—the Solvency II directive. As hon. Members will be aware, there have been various regulations relating to Solvency II. The directive was designed to codify and harmonise the EU insurance regulatory landscape. Part of that approach was the so-called protected cell company, which enables many separate insurance-linked securities deals to be managed by one company, with the cell structure ensuring that the assets and liabilities of each deal remain strictly segregated.

Given the complexity of these investments, it is critical that they are not offered to retail investors, as indeed was stipulated in the 2017 regulations. As the Minister explained, today’s amendment arguably corrects a defect in the initial instrument by allowing qualified investors to participate, without any concerns about legal ramifications, in this market. Obviously, this regulation introduces the concept of qualified investors and defines them more clearly.

Finally, it would be helpful to know from the Minister what kind of oversight is going to be undertaken to ensure that this concept is not gamed by any of those offering these securities. It is a complex market. Yes, it is growing, but equally it is important that we ensure that there is investor protection. I would be happy to have some more detail on that.