This is why we continue to invest a large amount of our time engaging with our counterparts in Europe as well as with the European Supervisory Authorities, the ESAs. We liaise closely with EIOPA, the European Insurance and Occupational Pensions Authority. Julian Adams sits on the EIOPA Board of Supervisors and Management Board and this gives us an opportunity to participate at a European level. A few weeks ago, EIOPA reported on the critical issue of the long-term guarantees assessment and closed its consultation on proposals for preparatory guidelines. We now have acceptance that the classic matching adjustment is a prudent measure, which is hugely important for the UK life insurance industry. We know that many of you still have concerns around the restrictions built into the classic matching adjustment, particularly around the assets that can be used and the effect of possible downgrades in portfolios which are held for the long-term. We will continue to push for a prudent solution that will meet the needs of UK insurers and allows for the continued provision of annuities to policyholders. In doing so, we recognise that some restrictions are needed for the classic matching adjustment to be an effective and prudent measure. The importance of the EIOPA recommendations and their acceptance by the European Commission should not be underestimated. We have come a long way from the suggestion last year that a matching adjustment would not be part of the directive at all.
There is therefore a common feature of banking and insurance in terms of continuity of access to critical financial services. The PRA has the general objective of ensuring the safety and soundness of the firms under its regulation. Safety and soundness is defined in terms of the resilience of the financial system, which in itself is closely linked to the access of users to critical financial services on a continuous basis. But for insurance we have a second objective, namely the protection of policyholders. Why do we have a second objective for insurance? For me, the reason is that continuity of insurance protection – of risk transfer and long-term savings products – requires a greater assurance that the policyholder has access to their contract – in other words, it is quite contract specific, and in some cases those contracts are long-term in nature. For banks, depositors want continuity of access to funds, but they have less need of access to the exact contract – deposits can be moved. Put another way, most of the underlying risks to banks arise from their assets, whereas for insurers they arise from liabilities and assets. So, we need somewhat different objectives for prudential supervision. The traditional model of supervision has been quite industry specific. The FSA regime introduced in 1997 created a single authority, but within the FSA the framework of rules  BIS central bankers’ speeches  1  applied to insurance supervision was unique to the industry.