will implement the directive as intended. we can ’ t and won ’ t gold plate. our approach has been, and will continue to be, proportionate in our supervision. as a judgement - led, risk - based regulator, this principle is already part of the pra approach. it is not the pra ’ s role to make sure no insurer fails. however, we are concerned that any failure is orderly and manageable. we seek this in conjunction with appropriate policy holder protection. for example, when business models become challenged we may seek to secure manageable and orderly wind - down, as has been seen in the past in this sector. in fact, roughly one third of insurers authorised by the pra are in some form of run - off. more than just a capital regime, solvency ii strengthens the linkage between capital and risk management. solvency ii will introduce an enhanced system of governance standards – promoting the embedding of a strong risk culture, demonstrable within the day - to - day operations of insurers. the new regulatory regime will not look to fix firms ’ business models to be identical, nor to restrict the level of innovation across the market. rather, solvency ii seeks to promote a better understanding of the risks being taken, allowing insurers to take informed decisions. bis central bankers ’ speeches it is for firms ’ management to decide upon their chosen risk appetite and the precise details of their risk models. what matters to the pra is that firms hold capital commensurate to such risk exposures, in line with the directive. the introduction of the prudent person principle is an example of how risk management and strategic decision making will be owned by the insurer and its management. the prudent person principle will require investment decisions to be made as if being decided upon by the objective “ prudent man ” and represents a shift from quantitative to qualitative rules. gone are the old investment limits for asset classes. so insurers will have much more freedom in their investment choices. the pra does not and will not promote one asset class over another. there are two aspects to this : we recognise that life insurers can be an important source of long - term, stable financing for corporates, infrastructure and mortgages – this is an important function that we want to see maintained ; but we also must consider the wider financial stability angles, avoiding undue influence on the asset allocation behaviour of

of forced selling, as in autumn 2022 [ 14 ]. an unstable financial system is a problem for monetary policy. given these interactions – and with monetary and financial stability two sides of the same coin – why have two separate committees? indeed some have suggested we need one committee, to manage trade - offs [ 15 ]. if there are material trade - offs between objectives then there ’ s a good case for making joint decisions about them. decisions made based on one in isolation would not account for ‘ spillovers ’ to the other, leading to less effective policy overall. but there are other views. for example, the ‘ modified jackson hole consensus ’ ( reflecting a rather scenic annual conference held in the us ) holds that a separate financial stability policymaker – with an independent set of tools – should be responsible for financial stability, allowing monetary policy to focus on price stability [ 16 ]. in my view, this approach works well because although monetary policy and financial stability interact in complex ways, they are in the end complementary. this means there typically aren ’ t major trade - offs between the two – both policymakers will be pushing in the same direction. i think this is borne out by our practical experience. if the case for a single committee is not that strong given potential trade - offs typically involved, there are two practical reasons why it is desirable to have two separate committees : accountability and expertise. with independence comes a need to ensure that bodies like the mpc and fpc are held accountable for their performance. this is much easier when their objectives are clearly defined. two separate committees makes this easier. we also avoid a ‘ measurability ’ problem that my colleague ben broadbent has highlighted. here a joint committee might focus more on measurable monetary policy outcomes and neglect the important, but harder to summarise, job of financial stability [ 17 ]. expertise is important too. a joint committee would need all its members to span both policy areas. separation allows for more specialisation – people with financial services experience on the fpc for example – and more diversity overall. i would argue this makes for better policymaking. overall, and consistent with what some have called ‘ the model of a modern central bank ’ [ 18 ], i think there is a good case for two separate committees. and, as i shall explain, in the case of the uk, the institutional architecture for monetary and macroprudential policy sets us up well to deal with those interactions. nevertheless, there is