NU Online News Service, June 24, 3:25 p.m. EDT
Smaller carriers may need to raise capital to adhere to Solvency II requirements, leading to negative credit implications, according to Moody's Investors Service.
Moody's said it does not expect Solvency II requirements to lead to rating changes for its rated insurance and reinsurance companies, but it questions whether the smaller companies will have access to the capital markets, "especially with limited capital-raising track records," if they need to bolster capital for Solvency II, said Dominic Simpson, Moody's vice president-senior credit officer.
"Several companies, especially smaller ones with little business line diversity, may need to raise capital or alter their business or investment mix to meet the new, increased capital requirements of Solvency II," Mr. Simpson said.
The rating agency expects some consolidation or acquisitions by larger companies of the small- to mid-size companies.
The larger companies, for the most part, already conform to the Solvency II standards, Moody's said.
Solvency II, scheduled to go into effect at the end of 2012, is an updated set of regulatory mandates for insurers that operate in the European Union. It involves an overhaul of capital requirements, risk management standards, and disclosure and transparency requirements.
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