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March 27, 2013 6:52 pm
The head of the Lloyd’s of London insurance market has rebuked European regulators for issuing another set of guidelines for the implementation of long delayed Solvency II rules for insurers.
Richard Ward highlighted the tentative language used by the European Insurance and Occupational Pensions Authority (EIOPA), which said it had launched “a public consultation on guidelines related to preparation” for the regulatory regime.
“What planet are these guys on?” Mr Ward said, pointing out the Lloyd’s market had already implemented important parts of the regime. “They’re going through this bureaucratic, legal process.”
Mr Ward estimated compliance with the rules had already cost Lloyd’s about £300m. Solvency II – the regulatory framework designed to impose common capital requirements and risk management standards across the EU – has been in the works at least a decade. It is intended to replace a patchwork of local rules with harmonised regulations that will make insurers better match their risks with their assets.
But a series of delays has meant that Solvency II is now unlikely to be implemented in full before 2016.
Last month, Andrew Bailey, head of the UK’s new Prudential Regulation Authority, said the mounting costs – estimated to total at least £3bn for UK companies alone – were “frankly indefensible”.
Consultants said the latest EIOPA guidelines were designed to help national regulators implement parts of Solvency II earlier, starting next year. The Financial Services Authority has already taken such steps.
Paul Clarke, partner and global insurance regulatory leader at PwC, said: “The release of this consultation represents a very positive step in the move towards Solvency II implementation.
“It is important that, despite a potential delay to the start date, momentum is not lost.”
Gabriel Bernardino, chairman of EIOPA, described the guidelines as “an important step towards consistent and effective supervisory practices in the preparation for the Solvency II implementation”.
He said: “They will play an important role in supporting the good function of the internal market in the insurance sector and will ensure a higher quality of information.”
Mr Ward’s concerns came as Lloyd’s confirmed that it had swung back into profit in 2012, a year after a series of natural catastrophes pushed it to its heaviest loss since the 9/11 attacks.
Lloyd’s, which comprises various underwriting syndicates, made pre-tax profits of £2.77bn compared with losses of £516m in 2011.
This came in spite of $2.2bn of claims from superstorm Sandy, one of the costliest events in the 325-year history of Lloyd’s.
During 2012, Lloyd’s wrote £25.5bn of premiums, up from £23.4bn in 2011 – a figure that includes the impact of an average 3 per cent rise in insurance rates during the year.
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