Lloyd's has been lobbying the FSA, Treasury and European bodies to amend the capital requirements

Lloyd’s is making itself heard in Europe over its concerns about the European Commission’s Solvency II capital regime, according to finance director Luke Savage.

Lloyd’s main concerns about the new capital regime centre on the calculation of capital requirements using Solvency II standard formula, as calibrated according to the fifth quantitative impact study (QIS5). Lloyd’s argues that the standard formula is imposing too onerous capital requirements on insurers in particular areas.

The insurance market has been lobbying, among others, the UK FSA and Treasury, the European Insurance and Occupational Pensions Authority, and the European Commission itself, to amend the calculations.

“There are a number of people at the centre of Solvency II who have said that they realise there is more work to do on the calibration,” Savage said. “Commentators continue to say that Solvency II is not supposed to drive up the aggregate levels of capital, but they recognise in its current calibration that it would do so. The general sentiment is they are listening to us.”

However, changes could result in a further round of calibrations. “I don’t think there is enough time left to do a QIS6, but we might see individual components of the formula being retested under a new calibration,” Savage added.