LONDON, Dec 3 (Reuters) - Planned new capital rules for European Union insurers have cut the value of European stocks by nearly ten percent over the last three years, French insurer Axa said on Monday.
The Solvency II regime has prompted insurers to sell about 250 billion euros ($326.79 billion) of equities because shares attract a higher capital charge than bonds under the new rules, according to a study by Axa’s fund management arm.
This selling pressure is responsible for about a quarter of the 33 percent fall in European stocks compared with Jan. 2007, their peak prior to the 2008 banking crisis, Axa said.
Insurers have redeployed some of the cash into corporate bonds, raising their price and contributing to a fall in their average yield.
The industry has also bought more government bonds, which attract no capital charge under Solvency II even though the eurozone debt crisis has cast doubt over the supposedly risk-free status of sovereign notes.
Europe’s insurers are expected to sell a total of 500 billion of shares in the eight years to 2017 as they adapt to the new rules, with the industry’s bigger players accounting for most of the disposals so far, Axa said.
Solvency II is designed to make insurers hold capital reserves in strict proportion to the risks they cover, and is expected to usher in higher capital requirements for many.
The rules were originally intended to take effect in October this year, but have been repeatedly delayed due to wrangling between EU governments over how they should apply to life insurers.
They are now not expected to come into force until 2016 at the earliest.
$1 = 0.7650 euros Reporting by Myles Neligan; Editing by Louise Heavens