Are we to allow Solvency II do to our insurance companies what Basel II did to our banks?

Sir, Paul J Davies in “Capital rules raise fears over insurers’ risk appetite” April 20, though correct in so many aspects sadly makes precisely the same mistake that the Basel Committee did when they established their capital requirements for banks based on officially perceived risk. He says “The higher returns on risky assets ought to be diluted by a higher capital charge in perfect proportion. That ignores that the “higher return on risky assets” he sees is the result of the market already having looked at the same risk information available and adjusted their risk-premiums and interest rates correspondingly.

Is it not bad enough that Basel II drove our banks excessively into what was officially perceived as not risky assets, carrying no capital at all, to now have Solvency II doing the same of our insurance companies?