BONN, Germany, Oct 13 (Reuters) – Big European insurers need not fear higher capital requirements if they are placed on regulators' watch list of financial companies deemed 'too big to fail', a European Commission official says.
“I couldn't imagine that the solution would be more capital. That would be complete nonsense,” Karel Van Hulle, who is in charge of drawing up insurance standards at the Commission, told a regulatory conference on Thursday.
International regulators are drawing up a list of 28 global banks that are seen as systemically important financial institutions, or SIFIs, that will face extra supervisory scrutiny and capital requirements because of the pivotal role they play in the financial system.
Regulators plan to add to the list in the coming years the names of big insurers, such as Allianz , Munich Re and Talanx in Germany, but insurers say they are not as risk-prone as banks and should not be lumped in with them.
Europe's new risk-capital rules for insurers, known as Solvency II, should avoid the need for additional capital buffers, at least in Europe, Van Hulle says.
“If a company applies Solvency II in the way it was designed, I cannot imagine that we would now invent something else just because it happened to be a SIFI,” Van Hulle told Reuters on the margins of the conference, which was organised by German market regulator Bafin.
Solvency II, expected to come into force in 2013, is aimed at better protecting consumers by requiring insurance companies to more accurately match the capital they hold to the risks on their books, reducing the chance that an insurer gets into financial trouble.
It is possible that capital requirement charges might be applied to insurers in other areas of the world that had lower capital standards, he says.
“The discussion of whether or not there will be SIFIs will start when the United States identifies some of their companies as SIFIs. Then there will be enormous pressure and we'll have to see how Europe reacts to it.”
“We want all companies to be properly supervised,” says Van Hulle.
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