regulations which were over - cooked by the eu, without tackling other areas where regulations are too weak, then we are putting policyholders at risk. the interests of pensioners and other insurance policyholders can get lost in these debates, but parliament has given the pra a primary objective to protect policyholders, and it is a central part of our job to highlight risks and propose ways to deal with them. while pursuing our primary objectives of safety and soundness and policyholder protection, we also have regard to a number of important considerations, including the competitiveness of the sector and the contribution it can make to long - term economic growth. we are also mindful that as part of its review of the future regulatory framework, the government has proposed to give the pra a new secondary objective to promote long - term economic growth and international competitiveness, alongside our existing secondary competition objective. with all of those factors in mind, we think we can deal with the risks we are worried about while also supporting the government ’ s wider objectives. specifically, some in the insurance industry have the impression that we are opposed to any release of capital requirements for insurers. i want to be very clear that that is not the pra ’ s position – indeed, following a lot of work and examination of the evidence over the last year or so we think that a substantial capital release should be possible while continuing to protect policyholders adequately. this could occur as part of a reform package comprising three main components : first, a large cut to the “ risk margin ”, which is an extra liability that firms have to carry in order to make it more likely that another firm will agree to take on their insurance policies if the firm gets into trouble, to ensure policyholders are still protected in that scenario ; second, a package of measures to remove unnecessary bureaucracy from the regime and enable insurers to invest in a wider set of assets ; and third, measures to put one part of the regime ( the “ matching adjustment ” ) onto a more sustainable footing. while there are important issues to debate on the first two elements, it ’ s on the third of these that there is the main current difference of view between the pra and parts of the life insurance sector and i will focus mainly on that element in my remarks today. what is the “ matching adjustment ” and why does it matter? the main point of contention in the review is what, if anything, to change about the calibration of a part of

is not yet settled. conclusion in our view our proposed package of reforms to insurance regulation will support all of the government ’ s objectives for the review. but it is essential that we take forward all three elements : a major loosening of one important part of the regime ( the risk margin ) ; changes to cut bureaucracy, and to enable insurers to invest in a wider range of assets ; and changes to put another part of the regime ( the matching adjustment ) onto a more sustainable footing. industry views at this stage seem broadly to support the first two elements of the package, but not the third. in our view a package which did not tackle the issues we have identified with the matching adjustment would be seriously unbalanced. it would simply remove bits of regulation that insurers don ’ t like without taking proper account of risks to policyholders, and would not provide a solid basis for investment. i worry that some might consider such a thing to be a free lunch, but in fact less capital, fewer checks and fewer restrictions on assets, with no steps to strengthen the part of the regime where that is needed, means more risk for pensioners and other policyholders. in our view leaving the eu should not lead us to lower standards of financial regulation in the uk. we should change regulations to work better for the uk, including by stripping away unnecessary bureaucracy we have inherited from the eu and taking steps to support investment, competitiveness and long - term growth. but changing prudential regulations in the uk should not be simply a one - way street, particularly where that would mean weakening protections for business which serves groups such as pensioners. there are areas where the regulation we have inherited from the eu is too strong for uk, and others where it is too weak. we should be willing to make changes in both directions where the evidence supports it. industry will of course have strong views on any changes – we should attach significant weight to these and be willing to adapt our thinking in light of evidence provided. but regulation is there to serve the british public, and that should guide us as we aim to strike the right balance in this important set of reforms. chart a : comparison of ma and fs for different asset classes as at ye20 source : ma asset & liability data submissions by firms as at ye20. the chart on the left is ranked by spread in bps ( lowest to highest ) ; the chart on the right is ranked by ma as a percentage ( % ) of spread