Still concerns over how insurers will react to higher capital mandates
San Francisco, CA -- (SBWIRE) -- 02/05/2013 -- The insurance industry for Britain has spent over £3 billion while preparing for the new rule-set levied by the Europeans, which they believe will never be implemented.
The FTSE 100 insurers told The Independent that the cost for the totality of red tape and compliance work that was taken for the preparation for the introduction of Solvency II soared beyond the £1.8 billion that had been estimated by the Financial Services Authority in early 2011.
The European Union claims that the Solvency II plan will protect insurers from the kind of shocks it has incurred in the past by making them hold more capital against their considerable liabilities. Still, talks over the partiuclar rules where originally estimated to be £1.7 billion, which has now moved to £2.5 billion across the region, and there seems to be no end in sight.
A source that is close to the situation stated: "Billions have been spent on Solvency II, with a high probability that the UK will end up with a regulatory regime not much different from the current one, which after all worked perfectly well even through the financial crisis."
The accountancy firm Deloitte stated on Friday that the changes may in fact force insurers to raise capital and thus charge larger annuity fees, which would result in power pension payments.
Tasmin Abbey, who is an insurance partner at Deloitte, said: "Solvency II has been several years in the making and brings many benefits, particularly in the way insurance companies manage their risks and hold capital against them. However, one of the key stumbling blocks in the negotiations has been the treatment of annuity liabilities and the implications for customers at retirement.
"Consumers could also be affected because annuity rates could fall by between 5 and 20 per cent, and that will effectively make retirement a lot more expensive."
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