Insurers will have to hike premiums and raise £50bn equity
The Association of British Insurers (ABI) has warned the Chancellor Alistair Darling that insurers may have to raise £50bn and up premiums under Solvency II, the FT reports.
In a letter, Stephen Haddrill, ABI director-general, said insurers would have to increase capital and reserves by £30bn (€34bn) to £70bn and similar effects would be seen across Europe.
“In the UK, the impact is close to requiring fresh equity capital equal to the industry’s current market capitalisation [currently more than £50bn]. It is hard to see how such a massive recapitalisation could be achieved,” he wrote in the letter seen by the Financial Times.
Over-capitalisation
“This huge over-capitalisation will mean investment returns in insurance will fall. Companies will exit the market, prices will rise, cover will reduce and innovation will lessen.”
Solvency II rules come into force in 2012. The Financial Services Authority, supports the ABI’s concerns, Mr Haddrill said.
Germans have complained too
The ABI’s German equivalent, the GDV, has also written to its government, asking Jörg Asmussen, a finance minister, to support its concerns about the directive being interpreted too restrictively, the FT said
The ABI letter says the changes will have a detrimental effect on general insurers as well as life providers and will harm Europe’s competitiveness in insurance.
