European insurers complain over Solvency II

European insurance regulators have received a flood of critical responses to proposals to crank up the industry's capital requirements from across the continent.

Insurance groups and other interested parties have become increasingly united in their concerns as they have studied the proposals for the Solvency II directive, which is due to be implemented in 2012, over recent weeks.

The Committee of European Insurance and Occupational Pensions Supervisors (Ceiops), which is responsible for advising the European Commission on how to implement the rules, said on Sunday it had received 20,000 comments by Friday's deadline. It now has until the end of October to analyse those responses.

The CEA, the European insurance federation, issued a strong letter to the body consulting on the rules to complain that it had "abandoned the principle-based and economic approach it has adopted in favour of crude ratcheting up of financial requirements".

UK insurers had been most vocal about the new rules because of the extremely painful impact on their annuity businesses, which provide income to retirees. The Association of British Insurers this month warned the UK government that the changes could force the industry to double its equity base.

But the GDV, Germany's insurance industry association, is also pressing hard for changes. Jorg von Furstenwerth, chief executive of the GDV, told the FT it feared that European insurers would need much more capital than expected and this could lead to a significant increase in insurance premiums.

Axa, the French insurance group that has been one of the most enthusiastic supporters of the rules, also said it stood firmly behind the CEA's position.

It is not just insurers expressing concern. The Association of Corporate Treasurers in the UK has warned that the rules will hurt companies' ability to borrow and could harm the economy.

"The proposals as they stand will, we believe, reduce the willingness of insurance companies to invest in corporate [debt], which will have a negative effect on the real economy," said John Grout, policy and technical director of the ACT.

Jim Bichard, a partner at PwC, said Ceiops had gone beyond the provisions of the framework passed in the European parliament in April and its advice could put an even more costly burden on the industry in terms of compliance.

The Commission has to complete its drafting of the next stage of the rules by the end of next year. Some believe it has already become sympathetic to industry concerns and will ignore Ceiops' advice.

However, assessing attitudes in Brussels is complicated because a new Commission will almost certainly be in place next year, with associated personnel changes. Commission officials say only that the matter is at a very early stage, and that it is for Ceiops to consider.

Tidjane Thiam, chief executive elect of Prudential, said in an interview with the FT last week that the task of designing a single regime for many different companies across 27 different countries was was almost certain to create a system that was wrong for everybody.

"If you take a one size fits all approach, you're almost certain to be wrong for everybody," he said. "It's intellectually very attractive because ... we like elegant solutions, but there are lot of elegant solutions that don't work very well."

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