FT: Solvency rules could raise capital needs
01 February 2010
The Financial Times reports that Solvency II has raised the strongest reaction from UK life assurers who feared they might have to raise £30bn-£70bn in fresh capital. The biggest non-life insurers hope to avoid the capital requirements by using sophisticated models to manage risk and capital.
The Solvency II rules, currently being finalized ahead of a full test of their effects this summer, have so far prompted the strongest reaction from UK life assurers who feared they might have to raise £30bn-£70bn in fresh capital.
The biggest non-life insurers – such as RSA or the general insurance unit of Aviva – and many Lloyd’s of London insurers hope to avoid the extra capital requirements by using more sophisticated internal models to manage risks and capital. While EMB’s findings are based on the more crude standard formula, Mr Ahuja said even more sophisticated companies would likely find themselves with a lower buffer than they thought they had over and above their solvency capital requirements.
He added that the latest information from the Financial Services Authority, which will approve UK insurers’ internal models, showed it had received only about 120 applications from the more than 700 non-life insurers it regulates. “In Europe, the effects are likely to be worse because the sophistication of risk management techniques and of local regulators is behind the UK,” he said.
© Financial Times
