The insurance market initially said it would spend about £250m to prepare for Solvency II, which will change the amount of regulatory capital it holds against different risks.
But in a briefing yesterday Lloyd’s finance director Luke Savage said the true cost would be “considerably higher”.
Savage said Lloyd’s may have to hold two thirds more capital under Solvency II’s stringent requirements than it does today – an extra £10bn.
He said that would require Lloyd’s to generate £2.1bn more profit every year just to maintain its average return on capital over the past five years. “To us, that’s a nonsense,” he added.
Solvency II will replace the current insurance regulatory regime in January 2013 and will require insurers to hold more capital against risk than at present.