The Solvency II Experts News

The consultation period for the first wave of CEIOPS’ 2009 consultation papers has now passed, with the second wave expected imminently. Although the consultation papers amounted to over 300 pages, across 12 consultation papers, it is probably fair to say that there were no ‘show-stoppers’ arising from the consultations. That is not to say that there were not any important issues arising from the consultations – there have been many comments made by various stakeholders identifying issues which will need to be addressed and considered – but it does demonstrate how an open and co-operative discussions between regulators and industry can help to develop a sensible, workable and more secure supervisory regime.

The remainder of 2009 is likely to be taken up with the remaining Second and Third consultation waves, currently expected to span July-September and November-December. However whilst the remaining consultation papers are awaited, it might be worth reflecting on some of the more salient issues arising from the first wave of consultations, at least from a General Insurance perspective.
The following issues are those that we have identified as some of the concern to our members who are general insurance companies operating in the London commercial insurance market.

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Solvency II is intended to radically change supervision of insurance within the EU. It will move Europe’s insurance supervision onto a modern, risk-sensitive platform far superior to that of the existing Solvency I regime. Meeting all the requirements of the Directive will however not happen overnight; hence many regulators have highlighted the need to start planning for implementation now.

To be Solvency II compliant by 2013, it is essential to identify precisely what activities will be required and how they should be prioritised. Drawing the overall road map and estimating global cost will also need careful consideration early in the Solvency II project. Companies should not treat Solvency II as a pure compliance exercise and should concentrate on identifying synergies between business needs and compliance requirements to drive business efficiency opportunities.

Solvency II will require insurance companies to integrate risk and risk management in all aspects of corporate day-to-day decision making, in particular in terms of setting the strategy. Insurers will need to strengthen the links between all the competencies that contribute to risk management.

In this article, Raphael Borrel and Michel de La Belliere highlight some of the challenges that insurance companies face in their attempt to implement the Solvency II Directive.

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In this article, Walter Wartenweiler summarises the results of a forthcoming contribution from W. Hürlimann, “Optimization of the non-life risk diversification in Solvency II” which will be presented at the 39th International ASTIN Colloquium, Helsinki in June 2009.

This contribution focuses on the optimisation of the geographical diversification of the premium and reserve risk in non-life insurance. It shows that the QIS4 specification for geographical diversification is not optimal. Click here to read full article

Dutch health insurers are challenged by art. 101.5 of the draft Solvency II directive which requires them to “take account of the effect of risk mitigation technique” when they calculate their SCR for compulsory private health insurance . Calculations under QIS 4 indicated that the SCR would double existing solvency requirements for this insurance compartment. This article provides an overview of the Dutch Compulsory private health insurance and of the QIS3 and 4 results relating to it. Click here to read full article.

On September 25th, the FSA (United Kingdom) published a discussion paper, Insurance Risk Management – the path to Solvency II. In this article, the FSA focuses on the key messages of the discussion paper, providing a high level summary of key considerations for the three Pillars and some additional information in relation to the level of preparedness of the insurance industry in the United Kingdom.

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IT appears like an iceberg on the route to Solvency II: the visible part is a small set of expectations about data and models in the directive and regulatory papers. But underneath this emerging tip, the implications for IT are huge and lead to large efforts to implement new tools and architectures or upgrade the existing ones.

Recognising this reality and starting now to chart a well-informed course for IT: this could be the difference between success and failure in the implementation of Solvency 2 in 2013.
In this article, Michel de La Belliere, Partner at Deloitte Conseil and Aomar Aoulmi, Manager at Deloitte Conseil highlight some of the key IT considerations insurance organisations should think about for a successful implementation of Solvency II.

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Interim Solvency II experts are commanding £800 per day in the UK and
€1000 across Europe as a whole.  These figures are still rising as demand
spirals.  Permanent position candidates with knowledge of Solvency II have
also gained increased bargaining power.  These candidates are automatically
achieving pay levels in the upper quartile of contemporaries’ salaries – CROs with Solvency II knowledge can command up to £250,000 in the UK and €270,000 across the rest of Europe.  Even in today’s markets, they’re looking at bonuses of around 60%. Click here to read full article

In Standard & Poor’s recent report (One In Four Of Europe’s Insurers

Could Face Major Strategic Decisions Under Solvency II), Standard and

Poor’s highlighted that many companies might not be able to meet the

new Solvency Capital Requirement (SCR) under Solvency II.

In This article, Standard and Poor’s  provides guidance to what

companies should be doing now to ensure they are prepared for the

implementation of Solvency II in 2012.

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