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Insurers prepared for international regulatory changes: Fitch

Insurers prepared for international regulatory changes: Fitch

The implementation of Solvency II capital requirements and other international regulatory changes is unlikely to hurt the financial strength ratings of insurers, Fitch Ratings Ltd. said in a report issued Tuesday.

While some insurers may need to increase their capital to comply with regulations, most already are sufficiently capitalized, according to the rating agency.

But any further increases in capital requirements could raise the cost of capital and reduce competition in the market, Fitch said in the report, “New International Ratings No Threat to Ratings.”

Fitch added that insurers' focus on regulation likely will lead to improvements in risk management within insurers.

But it said that for large European insurers that already are well-regulated, “the benefits of incremental improvements in risk management frameworks could be outweighed by the costs associated with the increasing regulatory burden.”

Fitch said a key concern for insurers is that regulators take account of the difference between banks and insurers, which typically pose far less of a systemic risk.

European insurers already are well-advanced in their preparations for Solvency II, the risk-based capital rules for insurers and reinsurers that will come into force in 2016, Fitch said.

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