New European rules on insurer solvency could trigger a wave of consolidation and encourage insurers to move away from certain product lines
New European rules on insurer solvency could trigger a wave of consolidation and encourage insurers to move away from certain product lines.
Solvency II, a Europe-wide directive on supervision and capital requirements, is expe-cted to be published this week.
The new rules, which will introduce a more risk-based assessment of the amount of capital insurers must hold, could see higher-risk products becoming more expensive, according to the ABI.
“Products such as long-tail liability may become more expensive, while motor and household may well get cheaper,” said Peter Vipond the director of financial regulation at the ABI.
Vipond also said it could also encourage insurers to diversify their books of business and should make it easier for companies to become involved in cross-border mergers and acquisitions.
“It will encourage more M&As and trading of books of business to re-balance risks.”
He also said the rules could encourage insurers to securitise books of business.
Solvency II is expected to be implemented by 2012, at a cost of around £2bn.
