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FRANKFURT, Jan 28 (Reuters) - The European Union's insurancewatchdog has invited feedback on new rules about capitalrequirements and risk management, after life insurers complainedthey would make products with long-term guarantees toofinancially burdensome to be viable.
The European Insurance and Occupational Pensions Authority(EIOPA) said on Monday insurance companies would have nine weeksto test options in the proposed rules, known as Solvency II.
Some life insurance companies have said that the proposednew rules would make their products unworkable because theywould be forced to hold so much more capital in exchange forselling products guaranteeing returns to customers.
With traditional guaranteed life insurance products, theinsurance company bears the risk of covering the futureguarantee, as opposed to index-linked life insurance, where theconsumer bears all the investment risk. The former type ofproducts are particularly popular in Germany, France and Spain.
European life insurance premiums totalled 633 billion euros($853 billion) in 2011, according to industry trade bodyInsurance Europe. Insurers expect the study's results to showthat a major rewrite of the rules applying to life insurancewill be needed.
This could hold up the formal introduction of Solvency II,which EIOPA expects will come into force no earlier than Jan. 1,2016. Germany's insurance watchdog has said that a 2017 startmay be more realistic.
EIOPA has said it will try to bring forward other parts ofthe rules, where there is widespread agreement.
The Chairman of EIOPA said in a statement on Monday that thestudy would provide a "reliable basis for an informed politicaldecision" on what requirements for long-term guarantees will beincluded in Solvency II.
"It is essential for policyholder protection and financialstability that Solvency II appropriately reflects the long-termfinancial position and risk exposure of insurance andreinsurance undertakings carrying out insurance business of along-term nature," Gabriel Bernardino said in the statement.
Insurers are not required to participate in the assessmentbut EIOPA said it hoped as many as possible would take part.
Big insurers like Allianz, Axa andGenerali are expected to be well-prepared for SolvencyII, but many smaller insurers feel the rules are too complex orshould not apply to them to the same extent.
Insurers will have until March 31 to carry out theassessment, with national supervisors reviewing the data inApril and May before handing them over to EIOPA and the EuropeanCommission for analysis.
The technical results and EIOPA's conclusions are due to bepublished in the second half of June, the watchdog said.
