Insurers relieved as EU politicians finally agree solvency rules
EUROPEAN insurers breathed a sigh of relief yesterday that a deal on new capital requirements was less burdensome than initially feared, ending an uncertainty which has been hanging over the sector for many years.
Lawmakers from the European Parliament and representatives of European Union states agreed the new Solvency II rules late on Wednesday to end a 13-year legislative marathon.
The reform will be phased in from January 2016 but top insurers like Prudential, Aviva, Allianz, Axa and Generali have already spent millions of euro in preparation.
"It is fundamentally good news for the industry because we've always believed in a risk-based regime with the appropriate definition of risk," Tidjane Thiam, chief executive of British insurer Prudential, said.
The rules aim to make sure the European industry, which manages investments worth more than €8 trillion, holds enough capital to withstand market shocks.
Negotiations had became bogged down over how much of a capital cushion should be held against insurance products that offer long-term guaranteed returns, such as annuities or lump sums on retirement.
The European Insurance and Occupational Pensions Authority (EIOPA) had alarmed the industry with a compromise on how to "calibrate" capital held against such products.
Wednesday's deal dilutes this compromise significantly in favour of the industry after Germany, Britain, France and other countries intervened.
EIOPA chairman Gabriel Bernardino brushed off the dilution of his proposals, saying uncertainty has been taken away.
"I don't think that by twisting some calibrations here and there you lose the fundamental, sound principles of Solvency II," Mr Bernardino said. (Reuters)