The UK insurance industry has shelled out more than £3 billion to prepare for new European rules it believes will never be passed.
This is according to the Independent on Sunday, which spoke to FTSE 100 insurers and found out the cost of red tape and compliance work for Solvency II has exceeded the £1.8 billion estimated by the Financial Services Authority.
One source claimed Solvency II – which aims to establish a revised set of capital requirements and risk management standards – is not likely to be much different from the current regulatory regime, “which after all worked perfectly well even through the financial crisis”.
The EU stated Solvency II will protect insurance firms from suffering major financial shocks by making them hold on to more capital against their liabilities.
However, the legislation has been slammed in recent years and the Prudential has threatened to quit the UK over the matter.
This comes after accountancy company Deloitte said on Friday (January 25th) the new rules could drive forward more capital for insurers, meaning they might charge more for annuities.