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The Actuary The magazine of the Institute & Faculty of Actuaries

More forests to consume

In another broadside on the volume of consultation hitting the insurance industry (see Industry news, The Actuary, August 2009), Towers Perrin believes that it could take well over 1000 man-hours of specialist resources to properly analyse, understand, respond and train senior management on the implications of the new Solvency II regime.

With the framework directive now approved, the focus of Solvency II has switched from the political negotiations to the detailed implementation measures underlying the new framework. The European Commission is responsible for implementing the measures and has requested advice from supervisors across Europe through the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS). The supervisors have already issued over 30 consultation papers totalling more than 1500 pages, spelling out details of the new framework, with more expected later this year.

Already, differences are arising between the industry and supervisors in areas such as the accounting for future premiums and the valuation interest rate to be used for the liabilities. Although these are technical issues, they could potentially make differences in insurers’ balance sheets in the order of billions of pounds.

“Solvency II is likely to be the number one priority for companies over the next few years, so although these consultation papers represent a significant investment, it will be time well spent,” commented Naren Persad, senior consultant within the Tillinghast insurance consulting business of Towers Perrin.

“The investment is essential, as in the end it will ensure that the final Solvency II system sets standards that are practical and achievable. The insights from the consultation projects will also help companies as they launch their internal Solvency II projects. It looks like it will be a busy reading season this summer.”