Lloyds of London faces £300 million cost for Solvency II
Solvency costs could push up insurance premiums and eat into insurers’ profits
By CFOWorld.co.uk | CFO UK | Published 12:18, 26 January 11
Lloyds of London will spend around £300 million as a result of the new Solvency II rules, £50 million more than previously estimated, according to the insurance market’s chairman.
Lloyds had previously estimated the cost at £250 million to prepare for the new European Union rules that come into force in 2013.
Lloyds chairman Peter Levene told Reuters it was a huge task. "It's costing Lloyds markets just to get ready for Solvency II 300 million pounds. It's a lot of money and it's a diversion of effort," Levene said.
Solvency II requires insurers increase the level of capital to cover insurance risks. The rules also require increased transparency, risk disclosure and risk management processes.
Some insurers are worried that the high costs involved in complying with the new legislation will push up the cost of insurance premiums as well as eating into insurers’ profits.
"The concept behind is good but we need to get details right and it does take peoples' eye off the ball," Levene said.
The European Commission estimates the total cost to the industry at €3 billion (£2.5 billion), although some analysts believe that it could be considerably higher.
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