Insurance companies have been urged to do more to educate their boards about Solvency II after KPMG research found that only one in five boards have received more than 15 hours training on the new European rules.
Bringing Solvency II alive in the boardroom - are you doing enough? also found that only 19% of insurers' boards were planning to increase the amount of training they offer on the legislation over the next 12 months.
According to KPMG, having an improved knowledge of Solvency II could give companies a competitive advantage, as well as ensuring they are able to comply with the rules, which place new capital requirements on insurers across Europe.
Phil Smart, head of Solvency II at KPMG, said: 'While the exact amount of training required will vary from one firm to another, the acid test is whether the board can collectively demonstrate they have the appropriate Solvency II skills to drive forward their businesses under the new regime and the necessary understanding of the requirements.
'Less than 15 hours is unlikely to be enough to ensure the required level of knowledge for most organisations given the changes made to prepare for Solvency II.'
He added: 'The regulators will be asking tougher questions of employees in key roles to test their understanding and application of the regime. Solvency II's reach goes far beyond the technical teams now and the potential consequences of non-compliance could be severe.
Using Solvency II metrics and relevant regulations will deliver a real competitive advantage for businesses by helping to inform their decision making - in particularly in relation to targeting mergers and acquisitions or potential divestments, KPMG said.
To ensure Solvency II is properly embedded across organisations, firms were advised to include objectives specific to the new rules in the way they measure their executives' performance.
The consultancy's research found that only 44% of firms were currently doing this. Paul Brenchley, a director in KPMG's risk management team, said: 'Our advice is that with less than 18 months to go, businesses should be looking now to incorporate Solvency II measures, were relevant, into next years' objective setting to "dry-run" them.'
KPMG did, however, find that 90% of insurers had started their board training for Solvency II, with one third of those surveyed having rolled out company-wide training programmes.
