Reuters: Regulatory News: UPDATE 1-Watchdog warns EU not to water down insurance rules

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UPDATE 1-Watchdog warns EU not to water down insurance rules Sep 30th 2013, 15:41 Mon Sep 30, 2013 11:41am EDT * EIOPA says watering down rules harms policyholders * Insurers to be stress tested in 2014 * EIOPA wants powers to ban harmful insurance products By Huw Jones LONDON, Sept 30 (Reuters) - The European Union's top insurance regulator warned the bloc's member states on Monday not to dilute rules forcing the sector to hold enough capital and protect policyholders. Gabriel Bernardino, chairman of the European Insurance and Occupational Pensions Authority (EIOPA) said it was a matter of urgency to finalise the rules known as Solvency II. Talks between the European Parliament and member states have become bogged down over how much capital insurers should hold against products that offer long-term guaranteed returns. EIOPA has put forward a compromise to help them reach a deal but lawmakers said member states want to weaken it. "I am a little bit concerned with some of the values I have seen floating around in terms of calibrations," Bernardino told the European Parliament. "We need to be careful to get the technical provisions as prudent as they can be. Technical provisions are the basis of policyholder protection." Solvency II has been years in the making and no start date has been agreed, leaving the industry in limbo after many insurers spent millions of euros to get ready. "Agreement on the final date is urgently needed ... to avoid market fragmentation. We cannot continue with the current regulatory uncertainty," Bernardino said, complaining that the lack of clarity was affecting investments by insurers. "I am confident there will be an agreement and it will be a good agreement. The degree of transparency of this regime needs to be preserved," said Bernardino. A speedy, robust deal on Solvency II would help Europe shape an international push to create the world's first standard on insurer capital, he added. STRESS TEST While Solvency II is seen as a more sophisticated approach to measuring risk than current rules, insurers continue to complain that the new regime is over-complicated. "We are not only facing higher capital requirements but also more restrictions that add complexity to our business model," said Oliver Baete, a board member at Europe's biggest insurer, Allianz. "In my old job (as CFO) I spent 20 percent of my time dealing with new regulations - 150 pages every Monday," he told an industry conference last week. Bernardino said insurers faced a comprehensive stress test next year, with risks from low interest rates a key focus. "Following our market analysis and risk assessment, EIOPA identified a prolonged period of low interest rates as a potential threat to the stability of the EU insurance sector." EIOPA will not publish individual company results of the test. Bernardino said there was no need to centralise supervision of top insurers in one go, as the European Central Bank will do for leading euro zone lenders from next year. Global regulators have designated nine insurers on a list for extra supervision and possible capital requirements because of their size and reach, with five from the EU. "That calls for a better coordinated supervision and we should do it on a step-by-step approach," Bernardino said. Bernardino also said EIOPA should have powers to ban products that harm policyholders. Link this Share this Digg this Email Reprints

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