Fitch questions Solvency II relocation impact

Rating agency Fitch has said that Solvency II is unlikely to lead to a wave of European insurers moving their headquarters out of Europe.

The announcement comes after various insurance leaders voiced concerns over the new rules, with some hinting that they may even have to move their headquarters out of Europe as a result.

In a statement, the rating agency played these fears down, saying that the central problem – that certain countries have not yet been granted equivalency – will be solved eventually.

It said: “Insurers with large US life operations would be most severely affected if the US regulatory regime is not granted equivalence with that of the EU.

This concern is the chief cause of Prudential Plc and AEGON's indications that they could move their headquarters. But while this extra capital requirement would be a significant burden, we believe the US regime will ultimately achieve equivalent status.

“Our discussions with non-life insurers indicate that they would not have to increase the capital they are holding for their US operations under Solvency II, making US equivalence less important for them.

“Differences in the implementation of the rules among EU member countries could lead some firms to consider moving headquarters within Europe. Hannover Re's announcement on Wednesday that it will change its legal structure highlights this possibility.

However, in general, relocating within the EU would have to result in a big benefit to justify the cost and would probably only be an option for firms with operations in another EU country on a similar scale to their home market.”