The Lloyd’s of London insurance market says it has spent £300-million ($480-million) preparing for new rules governing the industry.DAVE CAULKIN/The Associated Press
British regulators have given insurers more time to get ready for Europe's strict new Solvency II capital regime, anticipating that continued disagreements over the final shape of the rules could delay their introduction by two years.
Insurers developing models to calculate their Solvency II capital requirements could have until Dec. 31, 2015, to submit them for approval, compared with the original deadline of late 2013, the head of the Financial Services Authority's (FSA) insurance unit told an industry conference on Monday.
"We will engage with firms in the internal models approval process and agree a revised landing slot up to a maximum of December 31, 2015," the FSA's Julian Adams said.
The new timetable will if necessary be changed to fit any "credible" official implementation date for Solvency II that emerges, Mr. Adams added.
Solvency II, aimed at bullet-proofing European Union insurers against financial crises by making them hold capital in strict proportion to the risks they underwrite, is scheduled to come into force in January, 2014.
But insurers expect the new regime will be postponed by two years or more because of disagreements between EU governments over how to calculate the capital buffer for long-term life insurance contracts.
Talks on how to set reserves for life policies were halted last month pending tests to gauge the impact of competing methods, prompting the European Parliament to delay its vote on Solvency II, and effectively putting the 2014 start date out of reach.
The European Commission, the architect of the Solvency II project, has not publicly proposed a new deadline despite pressure from regulators and insurers to clarify the timetable.
"I want to make it clear that I fully understand the industry's frustration with this state of affairs," Mr. Adams said.
"I'd like to add my voice to those calling for a clear and credible timetable to be introduced at the earliest opportunity."
Leading European insurers have said they would rather Solvency II be delayed than pushed through only to be amended later, although most favour an early introduction to eliminate uncertainty over their future capital requirements.
Big international insurers have spent about £100-million ($160-million U.S.) each getting ready for Solvency II, according to the Association of British Insurers. The Lloyd's of London insurance market says it has spent £300-million.