LONDON, March 1 (Reuters) - British insurers called on the Bank of England on Thursday to ease a 50 billion pound ($69 billion) capital charge which they blame for pushing business overseas.
Although Deputy Governor Sam Woods has signalled a willingness to soften the so-called risk margin for months, the Bank of England has yet to deliver any change to the capital charge to cover what a third party would need to take over an insurer’s policies if it went bust.
In an unusually blunt statement to its regulator, the Association of British Insurers (ABI) said it was time for the BoE to act to address what a risk to financial stability.
“We’ve had over two years of words. The time has now come for action,” the ABI said, following up on a call in October from the British parliament’s influential Treasury Select Committee for an urgent change to the rule.
The BoE’s Prudential Regulation Authority declined immediate comment on the risk margin, which ties up about 50 billion pounds worth of insurance liabilities and has led some new insurance business to be reinsured overseas.
The British central bank has been sounding out insurers over how to scale back the risk margin, which is part of European Union insurance capital rules known as Solvency II, and could take a decision as soon as this month.
The EU’s insurance watchdog said on Wednesday there was no sufficient reason to change the risk margin rule ahead of a broad review of Solvency II in 2021.
Woods spoke at the ABI’s annual conference on Tuesday, but only reiterated a broad promise of reform.
“On the risk margin we will act to tackle the problems we, the industry and the TSC have agreed exist,” he said. ($1 = 0.7276 pounds) (Reporting by Huw Jones editing by Alexander Smith)