We’re listening to the reasons for that reaction, will continue to engage and look forward to responses to the  Page 10  consultation, in order to make sure we fully understand the concerns being raised. It is important that whatever decisions are taken on this topic are taken based on the latest data and I would urge insurers to participate constructively in our evidence gathering. We understand the pressures on firms and are being as flexible as possible to enable firms to respond to our request. More broadly, we would welcome any ideas and suggestions for how the issues we have identified can be tackled. We have laid out one model, but it may well be the case that this could be improved upon or that there are other ways of achieving our objectives. We think it’s essential that we tackle the problems we have identified with the current regime, but we have an open mind as to how this is done as long as it is done credibly. I am also hearing some insurers say that they would prefer simply to stick with the EU’s version of Solvency II as it evolves. To be honest I think this is a red herring. The government has been clear that the point of leaving the EU, at least insofar as financial regulation goes, is to enable us to tailor our regime to make it work better for the UK.
But it is equally important that we take steps to dampen the incentives the regime currently creates simply to seek out those assets which have a high return relative to the expected losses set out in the rules. This is particularly important because the competitive nature of the market for moving corporate pension schemes over to insurers means that even if firms have the best intentions to invest in productive UK assets, they will still be compelled to invest in the most MA-producing assets they can find or risk losing the business to other competitors. In order to make progress on these issues we have published a full Discussion Paper and Technical Annex, alongside the Treasury’s wider consultation paper, in which we set out the evidence as we see it and propose one way forward. [14] The data collection exercise we ran with the industry earlier in the review indicated to us that the different structures for the MA included in that exercise should not be pursued because their impact could be too large and in particular they would make insurers’ balance sheets too volatile. [15] The industry made these points very strongly, and provided data which supported their case. Hence our team went back to the drawing board and has brought forward revised proposals, which on our assessment are around 70% less volatile than the structures included in the earlier data collection exercise. So far the industry reaction to these revised proposals has been strongly negative.