Suffocating New EU Diktats Could Force Insurer Prudential Offshore

Britain’s biggest insurer is examining plans to move its headquarters offshore to escape increasingly onerous new European Union (EU) regulations. The radical departure could see the £36bn insurer sell its British operations, or spin them out into a separate listed company.

City sources quoted by the Sunday Times reveal Prudential, founded in London 167 years ago, is reviving a plan to move its corporate base from Britain to Asia. New EU regulations designed to protect the insurance sector against unforeseen financial shocks are believed to be behind the shift.

According to the newspaper the Solvency II rules, to be implemented in January, will require all European insurers to boost their capital reserves. In Britain, they will be implemented by the Prudential Regulation Authority (PRA), part of the Bank of England.

Prudential directors fear that the PRA will take a dim view of its big operations in America and Asia. Analysts believe the new rules could slash the company’s reserves from £9bn to £3bn.

Shareholders were given a warning in Prudential’s annual report, which warned of a £1.9bn hit to capital in its Asian business.

Prudential conducted a review of the company’s location in 2012. At the time, Tidjane Thiam, the then chief executive, said the new EU regime would force the insurer to dispose of £11bn of investments in British infrastructure projects to free up capital.

The new rules would hit Prudential harder than any of its British rivals, experts said.

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