Andrew Bailey, head of the City watchdog’s prudential business unit, said in a speech on Wednesday night that the costs of Solvency II – estimated to total at least £3 billon for UK companies alone – were "frankly indefensible". While he did not specify who was to blame, his comments are the latest sign of tension between national regulators and European policy makers over Solvency II.
His speech to a City of London audience comes a week after the Financial Services Authority sought to address concerns of big UK insurers by telling them they would be allowed to adopt parts of the regime in advance.
In response to the speech, Nigel Wilson, chief executive of Legal and General, said he welcomed the interim measure by the UK regulator but again criticised the EU-wide regulatory project. For UK companies, he said, the total cost was equivalent to half that of the Crossrail scheme.
Solvency II is designed to require insurers to better match the assets they hold with the risks they take and has far reaching implications for the groups’ risk management, corporate governance and the business they write. Insurers do not object to the ideas but have lobbied over crucial practical details – in part leading to the delays. They are particularly concerned about the prospect of onerous capital charges for life assurance products that offer long-term guarantees.
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