UPDATE 2-Admiral may move underwriting if UK insurers lose EU rights

* Says solvency capital ratio falls to 180 pct

* Shares down as much as 9 pct

* Ireland is possible alternative if new base needed (Adds CFO, analyst quotes, details, share movement)

By Noor Zainab Hussain

Aug 17 (Reuters) - Admiral Group Plc said it couldmove its European business to Ireland or another country ifBritish insurers lose their right to sell their products acrossEurope as a consequence of leaving the EU.

Admiral also said on Wednesday that tumbling interest ratesfollowing Britain's vote to leave the European Union in June hadhit its solvency ratio, sending shares in the insurer down by8.5 percent to 2062 pence by 0940 GMT.

Insurers are making contingency plans after the Brexit voteleft them facing the risk they could lose "passporting" rightsthat allow UK financial services firms to trade in Europewithout the need for locally regulated entities.

"If passporting is withdrawn then Dublin would be one of theplaces within Europe where we might look to base our Europeanunderwriting from," Chief Financial Officer Geraint Jones toldReuters, adding there would be no short-term decision.

Admiral, one of Britain's largest car insurance providerswith a market share of over 11 percent, also has operations inSpain, Italy and France.

"There is probably more logic in being based in a placewhere we already have an infrastructure and an operation," hesaid.

Dublin is a favoured alternative base to London for insurersdue to its proximity and similar regulatory regime, as well asIreland being an English-speaking country and having lowcorporate taxes.

BREXIT BITES

The company announced a solvency capital ratio of 180percent under new European rules, adding that the ratio was 196percent when calculated on a "volatility adjusted basis". Theratio was 206 percent in 2015.

Solvency II dictates the amount of capital an EU insurermust hold to reduce the risk of insolvency. The lower the ratio,the greater the chances of a company defaulting on itsobligations.

The rules require Admiral to calculate periodic paymentclaims liabilities at a "risk free" interest rate. When interestrates fall, the cost of these liabilities rise.

"What we saw post Brexit was fairly significant falls inrisk free interest rates. And so basically lower interest ratesmeans bigger liability valuation and hence less capital and alower solvency ratio," Jones said.

Analysts expect the lower ratio to reduce its ability toreturn cash to shareholders.

Admiral has said that it would return between 150 millionpounds and 200 million pounds of surplus capital over 2-3 years,subject to uncertainties.

"This is now expected to be 100-150 million pounds becausethe Solvency II ratio has proven volatile in the wake of UKLeave vote," UBS analysts wrote in a note.

The company reported a 4 percent rise in first-halfstatutory pretax profit, just below analyst estimates. It saidit would pay an interim dividend of 62.9 pence per share, up 23percent from a year earlier and above a forecast of 59.2 pence. ($1 = 0.7668 pounds) (Reporting by Noor Zainab Hussain in Bengaluru; Editing bySunil Nair and Keith Weir)