European rules aimed at making insurers safer may cost the industry as much as 200 million pounds ($310 million) a year in the U.K., said Andrew Bailey, the country’s top banking and insurance supervisor.
The delayed rules, known as Solvency II, may see insurance premiums increase by 0.1 percent to cover the cost of compliance, Bailey, chief executive officer of the Prudential Regulation Authority, said in a letter to Andrew Tyrie, chairman of the U.K.’s Treasury Select Committee, dated April 19 and released by Tyrie today.
Bailey, a deputy governor of the Bank of England in London, said the cost estimates, based on a no-delay scenario, were “subject to substantial uncertainty” and to be used as a “benchmark.”
Solvency II, intended to harmonize the way insurers allocate capital against the risks they take across the 27-member European Union, was originally scheduled to come into force in 2013. The regulations may not be implemented before 2016, Gabriel Bernardino, chairman of the European Insurance and Occupational Pensions Authority, has said.
“Strengthening and harmonizing the prudential regulation of the insurance sector across the EU could bring significant benefits,” Tyrie said in an e-mailed statement on letters that he and Bailey exchanged on the EU law. “But we haven’t seen any yet. Even now no one can be sure what it will add.”