Insurers attack Solvency II rules

Groups say that capital rules are too “conservative and prescriptive”.

Representatives of the insurance industry have written to the European Commission complaining that new rules could have a negative impact on the affordability of policies.

The leaders of four bodies wrote to Michel Barnier, the European commissioner for the internal market, criticising forthcoming capital rules for insurance companies as too “conservative and prescriptive”.

“It is absolutely imperative that changes are made to the overly conservative approach being adopted in several areas,” says the letter, which is co-signed by the CEA – which represents insurance firms – the Pan European Insurance Forum, the Chief Financial Officer Forum, and the Chief Risk Officer Forum.

The new rules, called Solvency II, are to come into effect on 1 January 2013, but are still in the draft stage. They will be finalised by the Commission and the European Insurance and Occupational Pensions Authority. They are aimed at protecting consumers by obliging insurance companies to hold a certain level of capital in reserve.

But the letter warns that the new rules could discourage insurers from planning for the long term and leave them vulnerable to economic downturns. This in turn could lead them to charge consumers more and could reduce competition in the sector.

Insurers say that the new rules would not ensure the financial stability hoped for by the Commission.