UK insurers have warned that they may have to ask investors for more than £50 billion extra in new equity if proposed new European regulations come into effect.

The Association of British Insurers has written to Alistair Darling to say that the mooted changes to the law would lead to a dramatic increase in premium rates.

In the letter, which was sent last month, the industry body warns that the proposals could hinder insurers across Europe and asks Mr Darling and the European Commission to intervene before they become law.

The mooted changes are set to come into force in 2012 and are set out in the “Solvency II” Directive. They aim to create a single standard for capital requirements across the EU, as well as improving transparency and capital management in the insurance industry.

The directive was passed by the European Parliament this year. It is with a European committee, which is considering how to implement it.

The rules will also affect future pensioners’ retirement income from annuities. Some executives claim that the need for greater capital reserves could cut retirement income from annuities by between 10 and 20 per cent.

Tim Breedon, the chief executive of Legal & General, said that the rules were “a betrayal of savers”.

Steven Haddrill, the director-general of the ABI, said that British insurers would have to increase capital and reserves by up to £70 billion if the mooted changes become European legislation. He wrote: “It is hard to see how such a massive capitalisation could be achieved.

“This huge over-capitalisation will mean that investment returns in insurance will fall.”

He added that the Financial Services Authority, the City regulator, supports the ABI’s concerns.

The organisation’s German equivalent, the GDV, has appealed to Jorg Asmusse, Germany’s Finance Minister, to step in on its behalf.

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