Solvency II rules are unlikely to lead to a wave of European insurers moving their headquarters out of Europe, according to ratings agency Fitch.
Both Prudential and AEGON have indicated they could consider moving their headquarters because their large US life operations mean they would be worst affected if the US regulatory regime is not granted equivalence with the European Union's.
This is because, under Solvency II, if an overseas regulatory regime is not considered equivalent with that in Europe, financial services companies have to set aside the capital to cover those risks.
But, according to Fitch, while this extra capital requirement would be a 'significant burden', it believes the US will ultimately achieve equivalent status.
Fitch also said its discussions with non-life insurers had indicated they would not havr to increase the capital they hold for US operations under Solvency II. This would make US equivalence less important for them.
The agency said, however, that differences in how the rules are implemented between EU countries could lead to some firms considering moving their HQ within Europe. Hannover Re's announcement on Wednesday that it will change its legal structure highlights this option, it said.
'However, in general, relocating within the EU would have to result in a big benefit to justify the cost and would probably only be an option for firms with operations in another EU country on a similar scale to their home market,' it added.
For companies such as reinsurers with business and risk profiles not fully captured within the Solvency II standard formula, the approval of their internal models - which aim to better reflect their risk profile and could mean they have to carry less capital - could be 'crucial', Fitch said.
'If the application of the standard formula would lead to much higher capital requirements the non-approval of internal models would lead to a competitive disadvantage for these insurers,' it said.
'Insurers are therefore likely to seek swift approval of their internal models. Hannover Re said it does not have any concrete plans to move, but it is reportedly uncertain regarding the approval of its own internal model. Relocating to another country in the EU could remove that concern.'
Fitch's comments came as media speculation grew that a meeting next week of the European Parliament's Economic and Monetary Affairs Committee could bring agreement between political parties on another key aspect of Solvency II.
The measures would shield insurers from the impact of market fluctuations and provide added protection to policyholders, The Telegraph said.
Parliament will vote on the issue on Tuesday, before entering tri-partite negotiations with the European Commission and EU member states to reach final agreement on the rules.