My Lords, there was one blissful moment when the noble Lord, Lord Newby, said that his speech had been pre-empted in which I thought that he was suggesting that mine had pre-empted it. Alas, that was not so; he was referring to the noble Baroness's speech, which means that I have to address myself to both noble Lords.
The issue is straightforward. It is a question of whether we think that the insurance industry is likely to face systemic risk in the way in which the banks did, and for which the Banking Act was subsequently passed to provide for the special resolution regime to deal with that matter. Insurance companies are different, a point that I made in my opening contribution. Above all, they differ from banks in the much lower importance of liquidity risks, which had a central role in the banking crisis. We all recognise that the liquidity risks to which the banks exposed themselves were somewhat removed from the general interpretation, hence the overextension of the banks into diverse financial systems, as a result of which some eventually suffered. The insurance industry has not suffered a general worldwide crisis over the past two years. The banks may have gone through their worst crisis for the past 70 years, but that is not the case with the insurance industry. That does not mean that it has not been affected; of course it has. However, the way in which risks crystallize, and the timescales in which they do so, are different in insurance. As we all recall from our long deliberations about the special resolution regime, it is directed towards an emergency and moves with force and speed to deal with a bank in crisis. We just do not see the insurance industry constructed in that way.
The regulation of insurance companies needs to be different from the regulation of banks. Of course we identify and track carefully all the potential consequences knocked on from any sector to another, but the simple fact is that insurance companies are not subject to the same risk as the banks. That is why the order provides for the exemption.