EU insurer rule change contested
Ministers are hoping to achieve a relaxation of proposed EU rules requiring insurers in the UK to keep an extra £50 billion in their reserves, it has been announced.
Financial services minister Paul Myners said the Government is concerned the Solvency II rules seeking "excessively conservative" capital requirements may be passed on to pensioners in the form of higher costs.
During a speech to the Association of British Insurers, Mr Myners said: "We absolutely cannot allow this to happen.
"Government is committed to ensuring that these regulatory reforms do not unintentionally impact the lives and wellbeing of pensioners in the UK and elsewhere in Europe."
In its present draft, the changes would mean annuity providers must have extra amounts of capital to protect themselves against possible declines in the value of the corporate bonds, which they use to fund customer payments.
The minister also warned about the risk of creating "structural imbalances" in the financial markets as a result of the current Solvency II proposals. He said this may occur if higher capital charges are imposed on corporate bonds than on other assets such as equities or gilts.