SOLVENCY II RULES COULD HIT INFRASTRUCTURE INVESTMENT, MPS WARN

Solvency II rules could have the effect of discouraging pension and insurance funds from investing in vital infrastructure projects in the UK, opposition ministers Chuka Umunna and Rachel Reeves have warned in a letter to Business Secretary Vince Cable and Chief Secretary to the Treasury Danny Alexander. The letter asks the UK government to outline the measures it will take to ensure that UK interests are taken into account. The letter warns that Solvency II as planned could restrict access to finance for UK businesses, reduce investment in infrastructure and damage any economic recovery. Umunna and Reeves also stated In the letter that, because the current proposals fail to take account of the differences between pensions and insurance, Solvency II threatened to "force UK businesses to divert hundreds of billions of pounds away from business investment, growth and job creation". This was because, under the new accounting regime, pension deficits would be "increased", and holdings of BBB-rated bonds would be restricted. They warned that this impact onpension schemes could push some UK businesses over the edge into insolvency.