The PRA remains open to all insurers seeking to operate in the UK, and will assess applications against a clear and consistent set of criteria. This includes hosting business on a cross-border basis both from the EU and more broadly provided, among other things, that we are satisfied that the level of “supervisability” of the EU branch and its parent entity is commensurate to the level of potential risk it poses to the PRA’s statutory objectives of safety and soundness and policyholder protection. Where appropriate, branch hosting provides a relatively low cost, low impact route for overseas insurers to operate in the UK. Key considerations of the assessment of “supervisability” is our view of the approach home state regulators take to supervision (which is likely to be made easier when assessing the EU given our rulebooks are broadly identical) and the level of co-operation we can secure from home states, including on the exchange of supervisory information. This latter requirement is as much an objective for us as it is for insurers – our ability to establish and maintain productive relationships with home state regulators will in turn enable lower friction access between insurance markets. We are working hard to build on our existing relationships with European and global regulators, and engagement to date on this has been positive. There are advantages in the branch model for both insurers and regulators, not least that duplication of supervisory activity is reduced.
As Mervyn King, the Governor of the Bank of England, stated explicitly to the point2: “..that’s what we have to do with every variable that we look at, work out why it’s growing faster or slower than it was before and not to use some rather mindless regression.…The secret of good policy is to try and think trough what are the economics of the shocks hitting the economy at present. That in a nutshell is my philosophy of how you should do policy. Don’t rely on regressions from the past.” Having discussed the role of monetary policy and rather complex economic models, I will move on to the final theme which may seem more prosaic, notably measuring current inflation. In general, the production level of economic statistics is probably very high in Norway, as shown in international comparisons by the IMF among others. It would also seem that it is very cost-effective. Improvements are frequently made to the methodology and the compilation of CPI statistics. In August this year, the indices for electricity, books and air travel were revised. Last year, Statistics Norway changed the method for the treatment of rents in the housing market, and the previous year the food index was revised. A general view is that changes in statistics production should be well documented and should place particular emphasis on identifying the effects such changes might have on measured inflation.