Letter to chancellor says measures will "destabilise the industry"
The ABI has launched a blistering attack on the new Solvency II regulations.
It has warned Chancellor Alistair Darling that the European insurance industry will be “destabilised”, EU insurers will lose out to competitors, and foreign insurers will avoid the EU.
It marks a step change in the industry’s response to the regulations. The ABI remains broadly supportive of the intention of the legislation, and the framework of the directive, but is thought to find the approach to implementation too cautious.
The ways of imposing the new rules have been drawn up by CEIOPS (the Committee of European Insurance and Occupational Pensions Supervisors) and are now out to consultation.
Industry sources suggested that the banking crisis had prompted CEIOPS to interpret the new framework too stringently – for example, by setting capital requirements too high.
In a letter to the Chancellor, written ahead of a meeting of European regulators later this month to discuss the implementation of the regulations, ABI director general Stephen Haddrill wrote: “The regulators have made proposals that are extreme, even though the industry has weathered the worst financial crisis in 80 years.
“Its reserving policies have been tested in reality, not in theory, and found to be secure. Major additions to reserves on top of current requirements are therefore unnecessary. But, worse, they will destabilise the industry, not add to its security.
“The competitiveness of the European industry will also suffer. Foreign insurers will avoid doing business in the EU; EU-based insurance groups will be disadvantaged. For example, they will have to apply EU reserving and capital rules to US business, making it impossible to win in that market.”
He concluded: “The commission needs to send a clear signal ahead of the regulators’ meeting … that it expects to receive proposals that are proportionate and backed by proper evidence and cost-benefit analysis, none of which is currently true. We hope the British government as well as the FSA will press for this.”
The Solvency II regulations are due to come into force in 2012.