Proposed Solvency II rules could make the insurance sector more vulnerable to economic downturns and force companies to charge higher prices, senior industry figures have said in an open letter to Michel Barnier, the European Commissioner for Internal Market and Services.
Europe’s four major industry bodies signed a joint letter to Mr Barnier objecting to onerous new capital requirements imposed by Brussels, reflecting growing concern at how Solvency II will damage the industry.
The industry bodies – the European insurance and reinsurance federation CEA, the Pan European Insurance Forum, the European Insurance CFO Forum, and the Chief Risk Officer Forum – warned that parts of the draft rules were “excessively conservative and prescriptive” and said the changes would “risk driving insurers out of their long-term business”.
“Stakes are high and time is running out: a failure to properly implement this reform would have dire consequences for an industry that represents a significant component of the EU economy, capital markets, old age savings and jobs.”
Solvency II, which has been under discussion for a decade, is being designed to protect consumers by ensuring insurers hold reserves in proportion to the risks they underwrite. The Solvency II framework is being formulated by the European Insurance and Occupational Pensions Authority and the European Commission.
It is due to come into effect in January 2013 but is still not finalised and recent tests found it to be prohibitive in areas such as disaster insurance.
The letter stopped short of calling for Solvency II to be abandoned but said Mr Barnier and the new EU insurance super-regulator should resolve the concerns by the summer.
Source : Financial Times
