From our point of view, while there is no agenda to increase capital levels, neither do we start from the viewpoint that the sector is obviously overcapitalised. We would expect that there will be significant changes at the level of individual measures, most notably the risk margin which we all agree is mis-calibrated for longer term liabilities, at current low levels of interest rates.7  And of course while dealing with the current regulatory regime we must be careful not to lose sight of our longer term forward-looking priorities: the impact of climate change and measures to mitigate this; the growing importance of Fintech and the role of shifting demographics across the globe. Conclusion  7  See June 2018 letter from Sam Woods to Treasury Select Committee 6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  I began these remarks by highlighting three things that insurers do for the wider economy:   Provide protection for significant financial losses;    Channel investment into a wide range of assets; and    Provide security of retirement income in the form of savings and annuities, facilitating stable demand for goods and services. On the first, there is a critical role for insurers to adapt and ensure they are able to meet customers’ insurance needs, particularly during the transition out of the crisis and also into the longer term. Firms should take early steps to assess what this could mean for their current business models.
It would be in no one’s interests for the experience of the Covid-19 crisis and responsiveness of business interruption cover to reduce consumer confidence in the value provided by insurance for financial protection. In the life insurance sector there is an opportunity for firms to leverage their position as long-term investors in a wide range of assets and productive investment, to support our economic recovery but this must not come at the expense of policyholder protection and the provision of secure retirement income. We would expect to preserve the current, adequate level of capital in the sector whilst seeking to reduce complexity and frictional costs within the regime. A financially resilient, competitive and productive insurance sector not only ensures that individual policyholders are protected, but signals an industry that is able to support the recovery of the wider economy whilst maintaining high prudential standards. 7  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  7