'Solvency II proposals not enough'

The latest revision of Solvency II proposals for European insurers offers no prospect of an end to the long-running dispute between regulators and insurers over suitable capital levels for products with long-term investment guarantees, according to Fitch Ratings.

New proposals from the European Insurance and Occupational Pensions Authority (Eiopa) contain some concessions on capital requirements for when bond markets are particularly volatile.

But, Fitch said, the industry was unlikely to be satisfied by this, given the potentially significant extra capital that might still be needed to support business with investment guarantees. These products are an important part of insurers’ business in several European markets, particularly Germany.

Eiopa’s proposals follow its long-term guarantees assessment, an industry study designed to clarify appropriate capital requirements for long-term guaranteed products under volatile and exceptional market conditions.

Fitch said it understood several major insurers considered the study to be inconclusive because the scenarios underlying the assessment were not, in their opinion, meaningful.

The ratings agency said that it expected the latest proposals would be just a starting point for more negotiations, potentially leading to further impact studies before any final decisions were made.