The Association of British Insurers has warned Solvency II could face further delays after European politicians failed to reach agreement on the final rules.
The new rules, which will force insurers to hold more capital to cover their risks, are due to be fully implemented by insurers by January 1, 2014, a year later than the original EU proposals.
It had been hoped a trialogue meeting between officials representing the European Parliament, European Commission and European Council today would resolve outstanding issues with the reforms.
However, an agreement has not been reached. This means that the earliest opportunity for the European Parliament to vote on the final Solvency II text – once it has been agreed – will be in October, after EU politicians return from parliamentary recess.
ABI director of prudential regulation Hugh Savill says:“We are disappointed that, despite best efforts from all involved, there was no agreement in the Solvency II trialogue.
“This delay was not caused or asked for by industry who are keen to see the outstanding issues on Solvency II resolved. This result raises questions about the timetable for Solvency II and will leave insurers in limbo until an agreement is reached.”
The ABI has lobbied for a “matching adjustment” in the final Solvency II rules to remove the requirement for insurers to take account of market volatility they are not exposed to when calculating capital requirements.
It says failure to include reference to the adjustment could force insurers to hold an additional £50bn in capital.
European Parliament economic and monetary affairs committee chair Sharon Bowles says: “Nobody amongst the parties negotiating wants a delay to the existing timetable but at the same time we do not want to deliver something that is wrong.
“The sticking point is around the provision of long-term guarantees, which for the UK means how to deal with annuities and whether a matching adjustment should be included in the final text.
“If we do not reach a rapid conclusion on these issues when we return from recess in September then the timetable will inevitably come under pressure.”
EU Commissioner Michel Barnier (pictured) attended talks on the content of the final rules, including the matching adjustment, last month.