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Regulation - FSA Proposals - Research shows insurers could miss capital requirements.
(From Reinsurance)
Almost a fifth of general insurance companies would currently fail to meet the FSA's new proposal for enhanced capital requirements (ECR), according to a new study from Tillinghast.
The company's research indicates that the average insurance company will need a capital ratio of 42% of premiums, compared to an average of 19% under the current statutory minimum solvency margin.
However, according to Tillinghast there are many companies that have ECRs that are significantly less than twice their statutory minimum solvency margins and it is possible that 20% of companies would fail under the new regime.
In order to address this they would either have to raise capital or reduce their ECRs, such as by turning business away and reducing their premium income.
Tillinghast also found that one in three insurers will have ECRs that are between double and triple their current statutory minimum ...
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