Striking a negative note at the Association of British Insurers’ Solvency II conference, at which delegates laid bare their anxieties over Solvency II, Carl Dowthwaite expressed concerns about the unintended consequences of EU regulation on providers’ ability to be creative with annuity products.
Mr Dowthwaite, who said he had examined the latest version of the European Union’s insurance regulation directive, said the proposals were an improvement on level-one standards but could leave the annuity market “restricted” in terms of introducing evolutionary new products.
He said: “I fear it may affect the scope for innovative products and could make it hard for firms to deviate from the standard patterns.”
Mr Dowthwaite said Legal & General had previously expressed concern about limited capital being available and the effect that this could have on restricting the market for consumers.
He added: “One of the concerns we had before was that maybe the capital won’t be made available, which would leave the annuity market restricted for consumers.”
Fellow panel member Jim Rasque, policy adviser for prudential regulation at Insurance Europe, acknowledged this potential problem. He said it had been difficult to find a compromise “when every market needs a different solution”, adding that some of the latest proposals could have an effect on the availability of investment products.
He said: “Some of the restrictions could narrow the scope for investors in the future.”
Sajid Javid MP, financial secretary to thre Treasury, said: “I am happy with the compromises that have been reached and hope this will finally be the moment to move things forward successfully.” He applauded the UK for its efforts to protect its interests and customers and said he is confident that Solvency II can work effectively.
Minesh Patel, a chartered financial planner for London-based EA Solutions, said: “Is it going to stop innovation? There has been a lot of innovation to annuities over the past few years and I can’t see what additional innovation can really happen. The concern now is confidence in the things that consumers buy and that is most necessary.”