Insurers From Axa to Prudential Face Tougher EU Scrutiny

Insurers from Prudential Plc (PRU) to Axa SA (CS) face tougher European Union oversight of compensation as the bloc seeks to crackdown on awards that could spur irresponsible risk taking.

Draft European Commission plans would require insurers to defer handing over a “substantial portion” of bonuses for at least three years in a bid to link pay to the firm’s longer-term performance, according to a document obtained by Bloomberg News.

Compensation policies should also incorporate measures to prevent over-reliance on bonuses, and avoid “conflicts of interest,” according to the document.

The plans are part of a set of draft standards to build on an overhaul of EU rules for insurers that will take effect in 2016. The measures, known as Solvency II, rewrite requirements ranging from capital rules to governance practices.

The commission, the EU’s executive arm, is responsible for preparing technical measures to flesh out financial legislation, which it then publishes for review by legislators. The non-public document, dated March 14, sets out work on those standards.

Chantal Hughes, a spokeswoman for the commission in Brussels, declined to comment on the document.

The compensation rules are less detailed than measures the EU has put in place for bankers, which include a ban on bonuses more than twice fixed pay.

Photographer: Alastair Miller/Bloomberg Photographer: Alastair Miller/Bloomberg

An Axa SA logo is seen on one of the company's branches in Paris. Close

An Axa SA logo is seen on one of the company's branches in Paris.

Close
Open
Photographer: Alastair Miller/Bloomberg Photographer: Alastair Miller/Bloomberg

An Axa SA logo is seen on one of the company's branches in Paris.

The requirements for insurers should apply to “persons who effectively run the undertaking or have other key functions and other categories of staff whose professional activities have a material impact on the undertaking’s risk profile,” according to the document.

Insurers should “operate a fully flexible bonus policy, including the possibility of paying no variable component,” according to the document.

To contact the reporter on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net Peter Chapman, Steve Bailey

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.