Bloomberg News

Solvency II Directive May Cost Dutch Insurers $350 Million

August 30, 2011

(Updates to add analyst comment in fifth paragraph.)

Aug. 30 (Bloomberg) -- Implementation of Solvency II, the proposed risk-based regulation for insurers in Europe, may lead to about 243 million euros ($350 million) in one-time costs for Dutch insurers, according to the country’s government.

In addition, insurers including Aegon NV and ING Groep NV, will incur 33 million euros in extra administrative and compliance expenses a year, the Dutch finance ministry said in an explanatory note to draft legislation published on its website today.

“The government’s estimate is in line with what insurers have signaled,” Jan Willem Weidema, an Amsterdam-based analyst at ABN Amro Bank NV said by telephone.

The rules, scheduled to come into effect in 2013, aim to provide a common regulatory framework for all insurers within the European Union and to strengthen insurers’ reserves to protect policyholders against a decline in financial markets. Firms that plan to use internal models to calculate solvency capital requirements, which the EU rules allow, may have combined one-off costs of 112.7 million euros, the Dutch government said.

According to Dutch central bank figures, six insurers will apply the internal models from the start of the implementation of the EU rules, the finance ministry said.

“It is striking that the Dutch government expects almost half of the Solvency II costs to come from the implementation of internal models,” Weidema said. “The general perception at investors and companies is that the central bank will not allow insurers to use internal models to a large extent.”

Insurers have until Oct. 7 to submit their comments on the government’s implementation proposal.

--With assistance from Martijn van der Starre in Amsterdam. Editor: Frank Connelly

To contact the reporter on this story: Maud van Gaal in Amsterdam at mvangaal@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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