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“Smart regulatory reform can spur investment from all over the world,” he said.

The final rules include cutting the so-called risk margin significantly, with a 65% cut for long-term life insurance businesses and a 30% cut for general insurance businesses. The reforms also include broadening eligibility criteria on the so-called matching adjustment, which helps dictate required capital buffers for certain assets, to include those with predictable cashflows.

Aviva group chief executive Amanda Blanc said: “This is a very welcome boost for UK investment. We estimate reforms to Solvency II will allow Aviva to invest at least £25bn over the next ten years across the UK, including in critical areas such as social housing, schools, hospitals and green energy projects.”

The Prudential Regulation Authority had previously questioned whether freeing up pensions and insurance companies to invest in riskier assets could leave policyholders at risk, but City firms had said a conservative set of rules was stopping them from backing more innovative investments that could generate higher returns for their customers. The PRA has been given the power to conduct regular stress tests as part of the final reform package.

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Andy Briggs, CEO of Phoenix Group said: “The reforms to Solvency II announced today present a very significant opportunity to ensure more private sector capital can be directed by insurers into the real economy and ensure we better mobilise the UK’s £3.4tn of pension wealth.

“These regulations are an important component of the changes needed to the wider UK investment landscape which will enable Phoenix to meet its ambition to invest more in the future. Phoenix plans to invest £40-50bn in illiquid assets and sustainable investments over the next five years to support house building, green energy, and local communities across the country without compromising policyholder protection in any way”.

The impact of the reforms remains uncertain however. Marloes Nicholls, head of policy and advocacy at the Finance Innovation Lab, “there’s no mechanism to ensure that the billions won’t just be spent on bonuses and dividends”.

READ Treasury plans to double Solvency II threshold

“Solvency II was intended to reduce risks for the economy and pension holders,” she added. “At a point when both have been hit hard by the recent turbulence, these reforms increase the risk of instability for little apparent benefit to anyone but large insurance firms and their shareholders.”

In the Autumn Statement, Hunt rolled back on the wider scrapping of EU law that was mooted by government figures like Jacob Rees-Mogg.

Instead of scrapping the entirety of the Brussels rulebook, Hunt said five limited sectors would be “supported through measures to reduce unnecessary regulation and boost innovation and growth” —  financial services, digital, life sciences, green industries, and advanced manufacturing — by reviewing retained EU law to identify changes that can be made over the next year.

To contact the author of this story with feedback or news, email Justin Cash