The costs of complying with the Solvency II rules have helped push up the costs by an average of about 75 per cent over the past three years, and some insurers have experienced rises of as much as 400 per cent, the study found. Insurers have for months been making the case they should not be hit with the same regulatory crackdown as banks, given that the vast majority of them survived the financial crisis intact.
The cost of compliance figures, garnered by Reynolds Porter Chamberlain (RPC), relates only to what the law firm termed “direct” costs of regulations, such as salaries for compliance workers. It excludes items such as external accountancy, compliance and legal advisers. It also does not include capital requirements.
“The message we’ve heard loud and clear from the UK insurance sector is that tighter regulation since the credit crunch has increased costs and led to greater business complexity”, said Steven Francis, partner and head of financial services regulation at RPC. “It’s not like the UK taxpayer had to bail out an insurance business, so it’s no wonder that senior figures within the UK insurance industry are angry that their businesses are spending so much money now on compliance.”
The Financial Services Authority said: “There are significant costs for insurers of working towards the European Solvency II requirements".
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