New EU rules forcing insurers to hold enough capital must be finalised this year to avoid prolonged delay and uncertainty for markets, a top UK industry executive said.
The European Parliament and EU Member States meet after the summer break to negotiate how much capital is needed to cover products offering guaranteed returns over several years. If there is no deal this autumn, the 2016 start date will be "well nigh impossible" given a legislative hiatus next year when the European Parliament goes to the polls, Simon Lee, chief executive of RSA said.
British insurers have become increasingly frustrated with the mounting costs of preparing for a new regulatory regime that has spent a decade in the making. Another year's delay would likely only add to those costs. Britain is introducing extra capital safeguards on insurers because it doesn't trust in-house models insurers will use to calculate capital requirements under the EU rules.
Andrew Bailey, chief executive of the UK Prudential Regulation Authority which regulates banks and insurers, has said the extra safeguards, which he terms "early warning indicators", flash if capital is too low.
Britain now wants the global Financial Stability Board (FSB) and the International Association of Insurance Supervisors (IAIS) to adopt similar capital safeguards across the world. The IAIS said it will develop "straightforward, backstop capital requirements" for top insurers by 2014 and is also working on the first global capital standard for insurers.
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