City Minister on why the government is supporting insurance as the engine of the economy

Our financial services sector is the engine of our economy, employing more than one million people - two-thirds of them outside London - and contributing more than £70bn in tax revenues every year, which are vital in helping to pay for our roads, schools and hospitals.

We’re in this position because we have played to our strengths. Our time zone, language, legal system, talent, capital markets, rapidly growing tech centre, and our world-renowned regulatory system have all contributed to this success.

As the Economic Secretary to the Treasury, I’m responsible for championing and preserving our world-leading position in financial services. To do this, it’s clear to me that we must continue to push for the liberalisation of services, and to work with enterprise to identify opportunities to enter new markets and win new customers.

I’m proud to say that as a government this is exactly what we’ve been doing, hand-in-hand with the industry.

Our fintech sector, for example, which barely existed a decade ago, now employs more than 60,000 people across the UK and received a record £2.1bn in investment last year. In insurtech specifically, we are supporting Innovate UK to create a £20m fund to help the UK’s insurance, accountancy and legal services to fully utilise new technologies like artificial intelligence and data analytics. And thanks to initiatives such as the Financial Conduct Authority’s regulatory sandbox, the UK has become the world leader in fintech development, ahead of other leading hubs like Silicon Valley, New York and Hong Kong.

Market leading

But we are also helping the more traditional parts of our financial services industry to take full advantage of the evolving markets. Since Edward Lloyd opened his coffee house over 330 years ago, the UK has become the world’s leading market for specialist insurance by constantly innovating. So when the London Market Group raised its concerns that specialist UK reinsurers could have a more competitive environment to do business in, we listened. 

Over the past three years, the Treasury, the regulators and the industry have worked together to create legislation for a new UK regime for insurance linked securities. This enables London reinsurers to undertake ILS business in the UK and participate in a rapidly growing global reinsurance market worth more than $90bn (£79.4bn). Without the framework in place, UK reinsurers were being held back from offering the fullest range of products to clients, despite all the expertise we have to offer.

The new regulations passed into law in December 2017 and I was delighted to see the first ILS deal agreed within two weeks. There are now other ILS developments in the pipeline and I am confident that the market will continue to grow. To celebrate, the Chancellor of the Exchequer Philip Hammond and I will be welcoming international ILS investors to London this month and we will encourage them to invest in the UK.

We have a long history of innovating and adapting as the world around us changes. Our strengths make us ideally placed to continually innovate to meet customers’ requirements, and an open partnership between industry and government will ensure we do just that.