Bank of England raises eyebrow over insurer reserves
- Top 10 News for 9/19 - 9/23: Twitter on the Auction Block; Allergan Bolsters NASH Effort; Microsoft Returns Value
- Wall Street falls as energy lags; shares post gains on week
- Rumored Forever, Twitter (TWTR) May Have Finally Put the 'For Sale' Sign Up
- Facebook (FB) Shares Under Pressure on Reports Video Ad Metrics Were Artificially Inflated
- Brookfield Infrastructure (BIP)-Led Consortium to Take Controlling Stake in Petrobras' (PBR) NTS for $5.2B
The Bank of England is seen through the columns on the Royal Exchange building in London, Britain August 4, 2016. REUTERS/Neil Hall
Get instant alerts when news breaks on your stocks. Claim your 2-week free trial to StreetInsider Premium here.
LONDON (Reuters) - Some British insurers have been too quick to tap reserves for propping up profits, the sector's top regulator said on Wednesday in its most direct warning yet.
David Rule, head of insurance supervision at the Bank of England's Prudential Regulation Authority, said despite falling premium rates, general insurer profits have for years been sustained by the absence of big payouts and releases of reserves.
Levels of reserve releases were now running at their highest level for thirty years, Rule said in his first speech in the job.
Insurers can tap reserves if these are "genuinely" redundant, meaning the likelihood of future claims has been reduced - but not as means of sustaining reported profits, Rule said.
PRA calculations show that the release of reserves assumes very low future claims "inflation".
"If the future trend is in fact in line with past inflation, booked reserves would need to be 25 percent higher than currently assumed," Rule told an industry conference in Dublin.
"Insurers... have critical questions to answer about the future direction of claims inflation."
(Reporting by Huw Jones; Editing by Ruth Pitchford)
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Philippines tells world not to interfere in Duterte drugs war
- UK doctors call off strike action
- N.Y. Times endorses Clinton in White House race
Create E-mail Alert Related CategoriesReuters
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!