Solvency II has also been thrown into the review mix – for what seems like an eternity now.
Originally brought in to reduce any possible risk of an insurer going belly up, EU rules have essentially forced insurers to hold a huge pile of cash that, until now, has been unable to be put to work elsewhere.
The government is hoping that this release of more than £100bn in capital will empower insurers to support more productive investments, like UK green energy, in the search for higher yields.
This sounds great in principle, but much harder to achieve in practice.
The problem is insurers have written guarantees with commitments in them that require some level of return, which, by definition, makes them more cautious.
Long-dated liabilities contracts held by life insurers tend to view illiquid private market type assets as risky.
The smaller and medium-sized insurance companies will be looking to understand the risks in investing in these types of assets; not just the management of that money, but advice on what these assets will do to their risk positions.
The Priips Kid
The other main Brexit-linked element is the hotly contested rule that covers the promotion of investment funds in Europe – the packaged retail and insurance-based investment products regulation (Priips).
From open and closed-ended investment to alternative investment funds, Priips covers a wide range of investment products.
The aim is to have one common key information document, known as a Kid, which investors can use to get all the main information around cost, risk and performance before they buy an investment product.
The issue with the Priips Kid is the way it calculates performance and costs.
But once again, if the UK is going to have a new methodology for calculating these different investment scenarios, is this not going to mean more operational headaches for investment managers with funds across the EU and UK?
Overall, the Edinburgh proposals raise far more questions than answers when it comes to whether the City can take advantage of its Brexit freedoms.
Only when the intricate policy detail emerges following this plethora of reviews can the City judge whether this government is really embarking on a second coming of Margaret Thatcher’s Big Bang.
Right now, it all feels a little too abstract.
Tim Focas is head of capital markets at Aspectus Group
