Strict proposed capital rules for insurers based in the European Union are unlikely to work in their current form and may be redrawn, the head of Britain's Legal & General Plc (L&G) said.
L&G chief Nigel Wilson said the EU was likely to abandon efforts to agree a harmonised set of rules and would instead allow European governments to modify their approach to suit the needs of insurers based in their countries. "I suspect there'll be a more pragmatic solution developed over the next few years which meets the needs of customers and regulators in France, Germany, the UK, Italy etc", Wilson said on a conference call on Thursday. "To try and harmonise 27 countries across Europe in the midst of a financial crisis is an extraordinarily difficult task, and everybody's realising that this is just going to be continually delayed."
Solvency II, aimed at making insurers hold capital in proportion to the risks they cover, is officially due to take effect in 2014, but has been held up by wrangling between EU governments over how it should apply to life insurers.
Wilson said there was a growing realisation that Solvency II could penalise insurers and restrict their ability to invest, increasingly seen as vital to kick-starting Europe's flagging economy.
He also hit out at the cost of getting ready for Solvency II, with L&G spending £129 million ($207.8 million) over the last three years, a small part of the "many many billions" committed by the EU industry as a whole. "The fact we've spent an incredible amount of money so far is the thing that's galling", Wilson said.
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