The European Union’s pending Solvency II requirements may stress small or insufficiently diversified carriers, a new report finds. The proposed requirements, due to be implemented toward the end of 2012, will have negative credit implications for some insurers, says new York-based Moody's Investors Service.

"In our view, although regulatory capital requirements will increase, most of the insurers we rate are unlikely to raise capital, simply because of Solvency II," says Moody's VP & Senior Credit Officer Dominic Simpson, who also authored the report. "However, from an industry perspective, Moody's believes that several companies, especially smaller ones with little business-line diversity, may need to raise capital or alter their business or investment mix to meet the new, increased capital requirements of Solvency II.”

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