BoE warns insurers on temptations of tapping reserves
LONDON, Dec (Shanghai: 600875.SS - news) 2 (Reuters) - The Bank of England warned Britain's insurers on Wednesday not to dip into their reserves to flatter earnings if this undermines resilience to market shocks.
Chris Moulder, director of general insurance at the BoE (Shenzhen: 200725.SZ - news) 's Prudential Regulation Authority (PRA), said some insurers may be tempted to increase releases of reserves, rely on top line growth or purchase specific forms of reinsurance to meet business plan and market expectations of profitability.
"As regulator, the PRA has responsibility to ensure firms continue to have an adequate level of resilience to meet current and future policyholder obligations," Moulder said in a speech released by the BoE.
"We expect boards to challenge where a firm's strategy either threatens this objective, or where the strategy compromises the ability for adequate oversight."
UK insurers such as Admiral have boosted profits by releasing reserves against future claims.. Analysts have called this strategy unsustainable
(Reporting by Huw Jones, editing by Carolyn Cohn)