UK insurers may have to bear cash calls of over £50 billion in case the proposed European rules are imposed on the industry.

As per information, Stephen Haddrill, the director general of the Association of British Insurers wrote a letter to Finance Minister Alistair Darling, mentioning the would be impact of the European directive that regulates capital reserves.

Stephen Haddrill wrote in his letter that the concerned proposal would amplify British insurers' capital and reserves requirements by £30 billion to £ 70 billion.

Stephen Haddrill further added, "This huge over-capitalisation will mean investment returns in insurance will fall. Companies will exit the market, prices will rise, cover will reduce and innovation will lessen."

In addition, many of the hedge funds are also thinking that EU has been considering a regulatory assault on them due to recent recession.

Mr. Haddrill was concerned about the Solvency II directive that will make its presence felt in 2012. It will bring single capital requirements standard through out the EU.

The Solvency II directive, which was passed in April by the European Parliament, aims at improving capital management plus transparency in the insurance sector.