THE CITY’S top regulator has slammed forthcoming EU insurance rules as excessively expensive, horrendously delayed, and unsuitable for many British businesses, according to documents released today.
Andrew Bailey, the head of the Bank of England’s prudential regulatory authority (PRA), said the regulations – known as Solvency II – were “lost in detail and vastly expensive”.
Bailey does not expect the rules to be implemented until 2016 at the earliest and has scaled down the regulator’s preparations.
The comments were made in a lengthy letter to Andrew Tyrie MP, the chair of the Treasury Select Committee, who told City A.M. that the entire process was “a classic bureaucratic nightmare”.
“For the best part of 10 years it has been mired in uncertainty, at great cost to the regulators, insurers and, ultimately, consumers,” said Tyrie.
“Solvency II is an object lesson in how not to make law.”
In the letter Bailey bluntly says he cannot be certain that major European nations will be able to agree on a final version of the rules, which were first proposed in 2000 and aim to ensure insurers hold enough capital.
“In particular, it is unclear to us that the French authorities will now be able to agree to any directive that we consider prudentially acceptable,” Bailey said.
British insurers and regulators have spent hundreds of millions of pounds preparing for the rules but Bailey uses the letter to suggest that they are a blunt instrument which could restrict the ability of national regulators to deal with idiosyncratic risks at a local level.