Solvency II "one of the biggest threats to UK jobs and growth", says Prudential head

Tidjane Thiam, chief executive of Prudential, said that the proposed the Solvency II regulatory framework could prevent the insurer and similar companies from investing in infrastructure and property.

The company has previously hinted that it could consider switching its headquarters to Hong Kong depending on the outcome of EU negotiations on the new regime, which is expected to include stricter capital requirements for insurers. Prudential currently conducts a significant and growing proportion of its business in Asia, according to its annual accounts.

"Political processes are unpredictable," said Thiam in comments reported by the Independent, made as the company published its annual accounts.

"We will never declare that we are happy with the rules until we have seen the final draft. Prudential invests billions of pounds into the UK economy and we will fight hard to ensure we continue to do so," he said.

The Solvency II regime, which will be implemented by the draft Omnibus II Directive (155-page / 3.7MB PDF) sets out stronger risk management requirements for European insurers and dictates how much capital firms must hold in relation to their liabilities. The rules have not yet been finalised, but remain scheduled to come into force on 1 January 2014.

As currently drafted, the rules could mean that European insurers will have to hold extra reserves against subsidiaries in countries where standards are less strict. No decision has yet been taken on whether capital rules for US insurers are compatible with the new regime, which could have an impact on Prudential's US subsidiary Jackson National Life.

In a "risk factors" document published alongside its annual accounts, Prudential noted the "significant uncertainty" regarding the final outcome of the negotiations.

"As a result there is a risk that the effect of the measures finally adopted could be adverse for Prudential, including potentially a significant increase in capital required to support its business and that Prudential may be placed at a competitive disadvantage to other European and non-European financial services groups," it said.

Omnibus II is currently scheduled for a vote in the European Parliament on 22 October 2013, according to the latest update to firms from UK regulator the Prudential Regulation Authority (PRA) (3-page / 83KB PDF).

"The work on the long-term guarantees assessment, the Omnibus II Directive and the EIOPA preparatory guidelines should come together in the autumn," Julian Adams, the PRA's executive director for insurance, said in the update. "There is, therefore, unlikely to be any certainty about the timetable before then."