A significant proportion of insurance companies are yet to engage with their asset managers about how Solvency II will impact on their business and could end up out of pocket as a result, Ernst & Young said this week.
The consultancy published the results of a survey which found that 54% of European asset managers had been in contact with less than half of their insurance clients about the legislation, which will place new capital and disclosure requirements on all European insurers.
One in four of the 44 asset managers surveyed said more than 90% of their insurance clients had yet to engage with them on Solvency II planning and requirements and 20% of respondents said engagement with insurers was their biggest challenge in relation to Solvency II.
Kieran Murray, Ernst & Young's Solvency II leader for asset management, said: 'It seems that managers are either waiting for their insurance clients to approach them with a wish list or are ploughing on ahead with their own Solvency II program without a full dialogue with their client base.
'Either way, dialogue between managers and the insurance industry will be crucial to creating workable Solvency II programmes and most insurers would benefit from upping their engagement to make sure they get what they need from managers.'
The survey also found that only 15% of respondents expect to not have their Solvency II program in place before the planned introduction of the new rules in January 2014. But Ernst & Young said there was uncertainty among asset managers about what insurers would expect from them beyond data compliance. 'More engagement between the industries is needed if the transition to Solvency II is to be seamless,' Mr Murray added.
Over half (51%) of asset managers said they were unsure how much it would cost them to meet their insurer clients' requirements under Solvency II, but only 14% were not considering passing any additional costs onto insurers.
One in four managers was certain they would pass on the cost of portfolio modelling and optimisation, while 16% of managers said they would levy a one-off charge for these additional services and a similar proportion had agreed to increase fund or management charges.
Mr Murray said: 'We would have expected there to be far more clarity in the plans for fund charges by now. The lack of consensus is in part down to managers not yet having discussed or agreed this with their insurance clients. The two industries need to start engaging on these details soon or one of them could end up out of pocket.'
