July 9 (Reuters) - Most British insurers consider the European Union’s upcoming Solvency II capital rules a “necessary evil”, but are concerned about the costs of the new requirements, according to a survey by auditor and advisory firm Grant Thornton UK LLP.
The new rules, due to take effect on Jan. 1, 2016, aim to better protect consumers by forcing insurers to match their capital buffers more closely with the risks on their books.
“The sector is begrudgingly ... recognising that (Solvency II) will bring some benefits,” said Simon Sheaf, head of actuarial and risk at Grant Thornton UK.
However, nearly two-thirds of insurers said the benefits of Solvency II would not justify the expense incurred, according to the survey.
Measures taken in preparation for Solvency II, such as upgrading IT systems, have cost the world’s biggest reinsurer, Munich Re, between 200 million euros and 300 million euros ($273-$409 million) in the last decade, Frankfurter Allgemeine Zeitung reported in February.
When asked by lawmakers this month if Britain’s insurers were in reasonable shape to meet Solvency II, the Bank of England’s director of life insurance, Andrew Bulley, said they were “overall, as well as can be expected”.
Almost all insurers said they would be able to meet the new requirements in time, but the survey also showed that nearly two-fifths of insurers believed less than 70 percent of their peers would be able to do so. ($1 = 0.7331 euros) (Reporting by Richa Naidu in Bangalore; Editing by Saumyadeb Chakrabarty)