LONDON Feb 7 A senior official at Britain's
financial watchdog said the "shocking cost" of Europe's new
solvency regulations could not be justified, given that they are
expected to total billions of pounds to implement.
Andrew Bailey, managing director of the Prudential Business
Unit - part of the Financial Services Authority (FSA) -
condemned the European Union for creating "such a vast cost for
an industry for the implementation of a directive which has not
even yet been finally agreed, and for which I cannot give you a
The cost to insurers is "indefensible and ever rising,"
Bailey told an audience of insurers in London on Wednesday.
The rules, known as "Solvency II", aim to better protect
consumers by insisting insurers improve risk management and more
closely match their capital to the risks on their books.
But they have faced repeated delays amid industry lobbying
to change details to the rules, such as the treatment of
investments like infrastructure loans.
Some life insurance companies have also said that Solvency
II would make their products unworkable because they would be
forced to hold so much more capital in exchange for selling
products guaranteeing returns to customers that the products
themselves would become uneconomic to offer
As a result implementation of the new regulation is now
unlikely to happen before 2016 or 2017.
The European Insurance and Occupational Pensions Authority
said in January insurance companies would have nine weeks to
test options in the proposed Solvency II rules. [ID: nL5N0AX821]
Insurers expect the study to show that a major rewrite of
rules applying to life insurance will be needed, adding to those
repeated delays in the introduction of the new regime.
Britain's FSA is being replaced next year by the Prudential
Regulatory Authority and the Financial Conduct Authority,
responsible for making sure banks and insurers treat customers
fairly, as part of a revamp of the regulatory regime launched by
the British government in response to the 2008