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The Actuary The magazine of the Institute & Faculty of Actuaries

EIOPA Solvency II work plan / Investing in UK-listed companies / Surge in online insurance search / UK big freeze claims costs

EIOPA publishes Solvency II medium-term work plan
Focus switches from regulatory advice drafting with Solvency II implementation less than two years away
The European Insurance and Occupational Pensions Authority (EIOPA) has published a Solvency II medium-term work plan. This is in addition to the recent publication of the Omnibus II Directive, which will amend the Solvency II Directive published in December 2009.

The implementation date of Solvency II, which is now 1 January 2013, is getting closer. Supervisors and the industry are getting ready to put Solvency II into practice while many regulatory decisions are still being made. The Solvency II medium-term work plan shifts attention from the drafting of regulatory advice to the implementation.

The work-plan contains the following milestones:
>> The results of the fifth Quantitative Impact Study (QIS5) will be available in March 2011. This will help to identify the most important regulatory issues
>> In June 2011 the Commission is expected to provide an official proposal for Level 2 implementing measures, which have been discussed in consultation papers since the end of 2009. This is intentionally scheduled after the conclusions of the QIS5 exercise
>> The Draft Omnibus II directive foresees that EIOPA will be required to draft binding technical standards (BTSs) in various areas by December 2011. The exact scope of the BTSs will need to be identified in order to prioritise the work
>> Final Level 3 Guidelines will be adopted in March 2012. This follows the pre-consultation period starting in the last quarter of 2010 with selected stakeholders
>> In the third quarter of 2011, EIOPA will assess whether third-country supervisory systems provide for a similar level of policyholder/beneficiary protection as under Solvency II
>> EIOPA will conduct informal consultations before publication of Level 2 proposals in June 2011, and public consultations afterwards.


Investing closer to home
Nigel Yates, investment manager at NFU Mutual, draws attention to the huge growth in overseas exposure by investing in UK-listed companies. Two-thirds of the revenues of listed UK companies are thought to come from abroad, while a quarter of UK blue chips have revenues of more than 30 per cent from emerging markets, and this may well continue to grow.

The UK is home to some large-dividend-paying stocks, but also offers significant exposure to cyclical companies. So, while portfolios can be cushioned by defensive companies like those in the pharmaceutical and utilities sector, they could also profit from the rise in demand for commodities such as gold, silver, iron ore and copper.

Mr Yates suggests that UK-listed companies could also benefit from a new five-year plan being introduced by China. This is likely to include significant spending on affordable housing, energy and transport infrastructure. UK manufacturer, Rolls Royce, could be a beneficiary of this through its expertise in power generation, nuclear and aerospace.


Surge in online searches for personal lines insurance
Online shopping for insurance has grown significantly in recent years, along with other major forms of online retail business, such as books and household goods. Quarterly research by the market research firm Greenlight uses industry data to identify 720 of the most popular search terms used by UK consumers to find providers of home, travel and car insurance.

There were over 1.7 million searches made online in October 2010 for insurance-related products. Terms pertaining to car insurance were most popular, accounting for more than half (51%) of all insurance-related searches. Travel insurance followed with 29%, then home insurance (20%).

Greenlight predicts that home insurance-related searches, which totalled 337,000 in October 2010, will see an increase in early 2011, as homeowners look to reassess their insurance options in the new year.

In natural search, MoneySupermarket was the site most visible to searchers. It secured 73% visibility, well ahead of its nearest rivals GoCompare (43%) and CompareTheMarket (37%). In paid search however, the picture was different. GoCompare was the most visible advertiser, with 61% share of voice. It was closely followed by MoneySupermarket (59%) and one insurer, Aviva (46%). Greenlight observed a notable entrant into the top 10 of its league table, USwitch. It assumed fifth position, achieving 31% share of voice overall.

The research also found that a notable number of brands do not have Facebook pages and therefore are isolated from social media interaction with consumers, a significant issue for some insurance websites that received negative consumer commentary.


Big freeze claims cost UK insurers more than £38 million each day
Home, business and vehicle damage caused by the big freeze in the UK at the end of 2010 cost the insurance industry more than £38 million each day, according to ABI figures. The total amount claimed due to adverse weather during November and December 2010 was £1.4 billion.

This is the highest payout to date for damage caused by freezing weather and heavy snow in the United Kingdom.

£900 million was claimed for damage to homes and businesses. This was made up of 190,000 claims. Of these claims, £680 million was for burst pipes. Additionally, £530 million of claims came from insured motorists for vehicle damage. This was made up of 278,000 claims. Most of these claims were for low-speed collisions on icy roads.