The Association of British Insurers (ABI) says the premium is needed to remove the requirement for insurers to take into account market volatility that they are not exposed to when the new capital requirements are implemented.
ABI director general, Otto Thoresen, says: “The measures agreed in the ECON committee of the European Parliament are far from perfect but pave the way for a constructive discussion in the next phase of negotiations on Solvency II. We urge the finance ministers, the European Parliament and the European Commission to work together in the weeks to come to address the outstanding issues.
“It must remain possible for insurers to continue to deliver products with long-term guarantees that are attractive to consumers. These are products that people rely on for their income in retirement.
“The final text must not constrain European insurers from competing successfully in the global market. The issue of equivalence must be resolved in order for the EU insurance industry to remain competitive and this will be an issue for which we, and our European counterparts, must seek a successful regulatory outcome.”
Experts say failure to include the matching premium in the final Solvency II rules would force insurers to hold an additional £50 billion in capital. The ABI says this could translate into a 10 to 20 per cent drop in annuity rates.
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