Insurance companies have mostly pledged to keep their results secret until leading European regulators have reported on the results in a couple of months. But people familiar with the London market said the standard model version of the rules, which is what companies tested, led to capital requirements of up to twice what Lloyd’s expected to have to hold.
“It is glaringly obvious the standard formula does not work for global players like Lloyd’s,” said Richard Ward, chief executive of Lloyd’s. “It is too onerously calibrated, particularly in its assumptions around catastrophe risk.”
Non-life insurers and reinsurers are expected to see the sharpest increases in capital requirements under the latest iteration of the rules, according to an in-depth study last year from analysts at Morgan Stanley and Oliver Wyman.
Higher capital charges in Europe, where Lloyd’s and many insurers are based, and in Bermuda, which has pledged to adopt the European rules, would be likely to push up commercial insurance premium rates.
© Financial Times
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