Speech delivered by Mark Garnier, Parliamentary Under Secretary of State at DIT, at the Association of British Insurers (ABI) conference.
Many thanks for your warm reception.
It gives me great pleasure to address your annual conference today to such an esteemed audience.
Represented here today are the many facets of the insurance industry: from life and pensions through to non-life and specialty insurers.
This is testament to the industry’s strength and diversity.
I have done a huge amount of work over the last 6 years in Parliament with the finance sector, particularly with my work on the Treasury Select Committee and Parliamentary Commission on Banking Standards.
I am now delighted to have responsibility for financial services within my department, and to be addressing an absolutely vital constituent of financial services in the UK.
The government enjoys a successful working relationship with the insurance industry, and has worked collaboratively with the ABI and others to deliver a number of key government priorities.
For example it is fantastic to see the enthusiasm and commitment from those in the industry who have committed to working with government to make the pensions dashboard a reality by 2019, helping people take control of what they decide to do with their savings.
As you will be aware, last week the Ministry of Justice published its consultation on a package of measures to tackle the high number and cost of whiplash claims.
The package builds on previous reforms to cut costs and strengthen the medical evidence provided for such claims, and we expect them to save around £1 billion from the cost of providing motor insurance, on average around £40 per policy.
We’re pleased that some insurers have already committed to pass on 100% of the savings.
The consultation will close on 6 January 2017 and we look forward to hearing your views on these issues.
Today I want to speak about 3 main things:
Firstly, an update on the changes to the machinery of government, the role of the Department for International Trade (DIT), triggering Article 50 and exit negotiations.
Secondly, the importance of financial services, particularly in regards to the insurance industry in its own right and its value to the UK and global commerce.
Thirdly, and perhaps most importantly, how we as government can work with the insurance industry to promote the work of the UK abroad, and ensure that we remain a hub of competitiveness and innovation at home.
First let me deal with the machinery of government changes and the role of my department.
Our Prime Minister, Theresa May, has changed the shape of government to deal with the choice of the British people to leave the EU.
The Departments for Business and Energy and Climate Change have merged to form the Department for Business, Energy and Industrial Strategy.
The department links industry to government to bring industrial strategy to the heart of government.
The Department for Exiting the EU has been created to establish our new relationship with European Union.
The UK is leaving the EU, but not leaving Europe, and the EU and its members will continue to be an important trading partner for this country.
Indeed, it is important for us to have a successful EU on our doorstep.
They are our friends, our allies, and our nearest and biggest trading partners.
Their success is in our best interests.
Leaving the EU will allow us to shape our own ambitious trade and investment opportunities, drive even greater openness with our partners, in Europe and beyond and put Britain firmly at the forefront of global trade and investment.
As we do so, there will be a number of challenges that we will have to face up to and tackle head on.
But the message to UK businesses and global investors remains the same as it always has: the UK is a beacon for open trade and we will continue to be a bold, outward-looking nation.
The DIT has been elevated to Cabinet to enhance the promotion of Britain.
The department is the sales force of the country going around the world promoting Britain as a great place to invest, a great place do business, and a great place to buy our goods and services.
We are also the face of government to business: to gather feedback, understand your issues and listen to what is required for an effective Brexit that works for Britain and industry.
Having overall responsibility for promoting British trade across the world, we are perfectly placed to bring together government, industry and our extensive overseas network of diplomatic missions to help UK businesses grow.
In talking to UK businesses we want to understand what more we might do to help companies that are only currently domestically focused, look abroad for their growth opportunities.
These are areas where we welcome the input of the insurance industry.
We recognise a comprehensive UK strategy needs to reflect our comparative advantage in financial and professional services alongside the traditional focus on goods.
The insurance industry is long used to operating in foreign markets across the globe, your knowledge and expertise in overseas markets, particularly in regard to regulatory barriers, is second to none.
We must work together to tackle foreign ownership restrictions, compulsory reinsurance cessions, collateral requirements, and to enable the movement of skilled people to and from overseas markets.
I want to briefly address the article 50 ruling and exit negotiations.
The government is disappointed by the High Court’s judgment on the proper process for triggering Article 50.
The country voted to leave the European Union in a referendum approved by an Act of Parliament.
And the government is determined to respect the result of the referendum.
We will appeal this judgment to the Supreme Court.
The Prime Minister has set out the timetable for triggering Article 50 by the end of March 2017 and that timetable has not changed.
As we leave the EU, our country is embarking on a long, important negotiation.
What we do now will impact our country’s future for many years and decades to come.
That is why we are so serious about getting the best deal possible for all the UK as we leave the EU.
And it is why we are not going to provide a running commentary on every twist and turn of the negotiation.
It is in all our interests for the UK and the EU to work together on both our withdrawal and a new relationship and for us to be able to deliver a successful outcome through a constructive negotiation.
How we take the process forward will be a matter for discussion with the EU institutions and our European partners.
Britain has been at the forefront of the free trade-supporting countries in the EU for the last 40 years.
We will have the right resources in place so we can secure the best possible outcome for the UK as a whole.
The department will continue to hire the brightest and best talent from within the UK and from elsewhere, in order to build a world class trade policy team that can deliver the best outcomes for the UK.
This leads me on to the second point, the importance of the financial services industry in its own right and its value to the broader UK and global economy.
2.2 million people work across the UK in financial and related professional services, accounting for 11.8% of the UK’s economic output and 11% of all tax revenue - that is one in every nine pounds spent on public services, like the NHS, is paid from financial services.
London is a truly global financial centre, ranking number one in most, if not all recent international rankings.
This is evidenced by the UK as the world’s largest exporter of financial services in the world, where we have a staggering $72 billon trade surplus, more than all other net exporting industries combined.
We lead the way in international banking, fund management, insurance, private equity and derivatives trading.
The UK also holds a leading position in the delivery of accounting services, legal services and management consulting, which serve as an integral part of the financial services ecosystem.
The Oliver Wyman report released last month outlines the scenarios and impact of Brexit on financial services to the UK.
The government fully understands the implications of Brexit to the financial services industry.
I want to turn specifically to your industry: insurance.
We recognise the important contribution that insurance makes to the UK economy and its pivotal role to being a global centre for business.
But we also recognise why insurance is so important to the broader economy of the UK.
Employing a significant proportion of our financial services professionals, over 300,000, the UK insurance and long term savings industry is the largest in Europe and the third largest in the world.
It plays an essential part in the UK’s economic strength, managing investments of 1.9 trillion pounds, equivalent to 25% of the UK’s total net worth, and paying nearly £12 billion in taxes to the government.
Its contribution to exports is also significant, especially in the Lloyd’s and London markets, and Insurers overseas are key contributors to the UK current account balance.
The government also recognises why the role of insurance is so important to the broader economy.
It is an essential part of everyday life, playing a crucial role in both economic development as well as having a role in supporting wider societal ends.
Insurance helps oil the engine of the economy, for example in underwriting trade through trade credit, or providing peace of mind to the public through collective insurance for a host of perils including flood, fire, and health.
In short, the economy and society as a whole benefits from the certainty insurance brings through a number of ways:
- protecting the public through innovative risk management techniques
- freeing up businesses and professionals from everyday risks, therefore encouraging innovation, risk taking and competition
- relieving the burden from the state and providing comfort to individuals by providing safe, effective and affordable pension savings and protections products, so people can save and plan for their futures
This leads me to address my third point,
My department’s role is to sell Britain’s capabilities and expertise, and our insurance and risk management expertise is something we can leverage as a true strength in our future trade deals and upcoming trade negotiations.
The history and experience of the insurance industry is a great asset. It has been built on a foundation of innovation and an ability to adapt to changing circumstances, technology and risk.
Many foreign governments look to the UK as the home of insurance and are looking for help and direction as their own markets grow, and to learn from our experiences, good and bad.
This gives us a great chance to help shape the growth and development of key markets that will be beneficial both to those countries, and also to our own industry.
Our world leading position in the proliferation and growth of our fintech sector will be key to cementing the UK as a leading reputation for innovation, and this is also an area we will seek to collaborate with the insurance industry.
Less than 2 weeks ago, on the 10 November, the Chancellor Philip Hammond and Chinese Vice Premier Ma Kai concluded the eighth UK-China Economic and Financial Dialogue talks.
As part of the dialogue, my department invited a number of leading Chinese insurers and asset managers to the UK to engage with and build links to our own industry.
They provided great insight to the needs of their market and where we can work together.
As a result of both this government and industry engagement, including the involvement of the Association of British Insurers, the Chinese government has agreed to create a joint task force between China and the UK on insurance and commercial pensions, to include both countries’ regulators and industry participants.
The China Insurance Regulatory Commission says it is also willing to work towards increasing foreign ownership of life insurance companies conducting business in China.
This is the kind of long-term engagement we want to enhance between government and the insurance industry and we are currently looking at what other countries this level of engagement would be beneficial, such as Japan and the US.
Insurance is a long-term business, and whilst our engagement with China and India is a long-term game.
We want to do more with developing economies.
Given the level of under-insurance in the developing world, we have significant opportunity to engage with many other markets, from key ASEAN markets such as Indonesia and Malaysia, to Latin America and Africa.
This is why the Foreign and Commonwealth office, The Department for International Development, Her Majesties Treasury and my department are all working across Whitehall to identify markets in need of our expertise and willing to work with us. We welcome the industries inputs into this.
But we must never rest on our achievements.
We are determined to continue to make Britain great – indeed greater.
Returning to the UK’s relationship with Brexit:
We will carve a new mutually beneficial relationship with Europe and a stronger relationship with the rest of the world.
The UK is committed to having the best regulation in the world which promotes a stable and efficient financial services sector and supports UK economic growth.
Our objectives in government are absolutely aligned to your interests in business.
As we work towards negotiating Brexit and getting the best deal for the UK, we will aim to limit uncertainty surrounding businesses and industries whilst also seeking to forge new relationships and seize new opportunities globally.
As I said earlier, before politics, I worked in financial markets for 27 years.
I personally understand the scale of the potential impact leaving the EU could have for parts of the financial and professional services industry.
That is why I am determined to listen to what the industry has to say on key issues, like access to the single market and transition planning during and immediately following the process of Brexit and Article 50 negotiations.
The British government is expanding our services to support our industry with a global focus, delivering and enabling global trade.
The UK economy is fundamentally strong, highly competitive, and open for business.
We should build on these strengths for a new era of outward engagement.
We very much look forward to working with the insurance industry on this crucial agenda.