LONDON, March 1 (Reuters) - The European Union must do more to make sure proposed new capital rules for European insurers do not hinder them from competing in global markets, Britain’s insurance industry lobby said on Thursday.
“We want to see third country equivalence move up the agenda in the months to come,” Otto Thorsen, Director General of the Association of British Insurers, told a conference in London.
“European companies must not be put at a competitive disadvantage with local players in international markets.”
Britain’s biggest insurer, Prudential, warned on Sunday that it might move its headquarters outside the EU if the bloc’s so-called Solvency II capital regime forced it to hold extra reserves, making it less competitive against non-European rivals.
Such a surcharge could arise if EU regulators decided capital rules for insurers in the United States, where Prudential has major operations, were less exacting than Solvency II.
Netherlands-based Aegon, which relies on the U.S. for about 80 percent of its earnings, has also said it might move overseas to avoid being hit with higher capital requirements.
The EU has until 2018 to decide whether U.S. capital rules are on a par with its own, thanks to a five-year transition period starting when Solvency II becomes law in January next year.
But assessing how compatible the two regimes are is complicated by a highly fragmented regulatory structure in the U.S., where insurers are regulated at state level.
Initial talks between regulatory authorities on the two sides of the Atlantic aimed at singling out the areas where their rules diverge most sharply have gone well, said Peter Skinner, a European parliamentarian who sponsored the Solvency II legislation in the assembly.
“We’ve made huge strides towards each other’s position, and that should be encouraged,” Skinner told reporters on the sidelines of the conference.
The EU is also in the process of assessing the capital regime for insurers in Bermuda, Switzerland and Japan.
The European Parliament’s Skinner said he was “confident” draft Solvency II proposals would make it through the European legislative process in time to become law as planned in January 2013.
In January, a key parliamentary committee vote on the proposals was postponed by 3 months, raising concerns Solvency II’s introduction, originally scheduled for January 2012, might be put back for the second time.
Big insurers have been critical of delays in finalising new rules, which they say prolongs uncertainty over the industry’s future capital requirements and deters investors from putting money into the sector.
Solvency II is designed to make insurers hold capital reserves in strict proportion to the risks they underwrite, replacing a patchwork of less sophisticated national rules.
The rules are expected to lead to higher capital requirements for many insurers.
Reporting by Myles Neligan; Editing by Jon Loades-Carter