Insurance regulators have intimated that they may be about to change the rules that annuity providers adhere to, which could result in UK insurers having to raise £50 billion in additional capital. In it’s present draft form entitled “Europe’s Solvency II rules for insurers”, would stipulate that those who offer pension annuity products will in future have to hoard more capital, should there be a decline in the investment market. So for example if the value of gilts or bonds issued by corporations were to fall, they (the annuity providers) would have greater protection as their level of capital would be forcibly higher.
However, some have argued that this would have a greater impact on UK based insurers compared to their European counterparts. This would include companies such as Aviva, Legal & General and the Prudential who sell a great many more pension annuities than comparable European providers. European annuity providers are also set to benefit from an increase in the number of people looking to purchase annuity products, as the state pension fades into less significance for many citizens in the EU.
