MNI BRIEF: Public Purse Risk From Insurance Reform -BOE Bailey

Bank of England Governor Andrew Bailey and his colleague Sam Woods, Deputy Governor for Prudential Regulation, warned parliamentarians that changes to the insurance regulatory regime posed a risk to the public finances.

The UK government has set out its final reforms to the Solvency II regulatory regime, easing regulatory requirements to try and boost insurers and reinsurers' investment in the UK. Bailey and Woods said that easing capital requirements ran the risk that if things subsequently went wrong for policyholders the government would intervene, hitting the public purse.

Bailey also told the Treasury Select Committee that the extra risk premium associated with the UK gilts curve in the wake of the short-lived mini-Budget from then-Prime Minister Liz Truss' government in late September seemed to have evaporated, but he warned that there was still "a hangover effect, I'm afraid," and mortgage rates had come back down, declining in line with rate expectations albeit with a lag.