LONDON (Reuters)—Governments and companies are broadly agreed that Europe's new Solvency II capital rules for insurers should take effect in January 2014, a year later than originally planned, British Financial Secretary to the Treasury Mark Hoban said on Thursday.
“There is a broad consensus in Europe that firms will be required to comply by 2014, with some 'soft' implementation from 2013,” Hoban told a conference organised by the Association of British Insurers (ABI).
The Financial Services Authority (FSA), Britain's financial regulator, said in October it would assume a 2014 implementation deadline, but European authorities have not formally changed the start date.
European Union ministers agreed in September that national governments should have legislation in place enforcing Solvency II by January 2013, but insurers will in practice not be required to comply until a year later, said Karel Van Hulle, head of the European Commission's insurance and pensions unit.
“(During 2013) they will have to calculate their solvency requirements and provide information to their supervisors to show they are ready to go in January 2014,” Van Hulle told Reuters on the sidelines of the conference.
Solvency II, aimed at protecting consumers and investors from insurance failures, requires insurers to hold capital in proportion to the risks they underwrite, replacing less sophisticated rules where capital varies according to turnover.
Some European insurers fear that the rules could lead to an excessive ratcheting up of capital requirements, and others have complained about the cost of preparing for the new regime.
The Association of British Insurers, whose members include Prudential Plc, Aviva Plc and Legal & General Plc , has put the cost of adapting to Solvency II at 100 million pounds ($156.7 million) for big multinational companies, while the Lloyd's of London insurance market has said it is on course to spend more than 250 million.
ABI chairman Tim Breedon said economic and financial market turmoil triggered by the eurozone sovereign debt crisis had reinforced the need to make sure Solvency II did not impose an unnecessary burden on the industry.
He also said the new regime should not prevent insurers from taking part in a British scheme to boost private sector investment in infrastructure projects.
“It would be a technical and political failure for the UK and Europe … if we allow regulation to tie our hands and prevent us from playing our part tackling the recession,” Breedon told the conference.
The current draft of Solvency II would impose a higher capital charge for infrastructure assets, potentially deterring insurers and pension funds from investing in them.
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