Just under half of insurers do not expect to be ready for the January 2014 introduction of the new Solvency II rules governing the European insurance industry, Ernst & Young said yesterday.
A survey of 160 large insurance companies across Europe carried out by the consultancy found 43% were not on track to comply with the new rules by their current implementation date of January 1 2014. Solvency II places new capital requirements on insurers to protect them and their customers against future financial crises.
However, speculation has grown in recent weeks that delays with finalising the legislation needed to introduce Solvency II could lead to the rules being implemented later than January 2014. Yesterday, Reuters reported they could be put back until 2016 or later.
Ernst & Young's research found that insurers were considerably better prepared for a later implementation date, with almost 90% expecting to be able to meet the requirements by January 2015.
Readiness varies from country to country, it also found, with between 70-90% of British, Dutch, Greek, Polish and Spanish insurers expecting to be ready to comply by January 2014, but only 60-70% of their Belgian, French, German and Italian counterparts.
In terms of the specific requirements of Solvency II, the lowest levels of preparedness were recorded for 'Pillar 3', which aims to increase transparency in how insurers report information to both regulators and the public. The vast majority (80%) of respondents said they had made little progress to date in meeting these requirements.
Martin Bradley, partner in financial services and global Solvency II lead at Ernst & Young, said: 'We know from those organisations that have started their Pillar 3 projects, the emerging data deficiencies and significant process, control and IT challenges present an ambitious target to achieve within the current timeframes.'
Almost two-thirds (69%) of insurers told the survey they had only met some or had not met any of the data management requirements involved in Solvency II, with 81% struggling in particular with data integration standards and their applications across group and external partners.
Jan Leiding, partner in financial services at Ernst & Young, explained that the data requirements represented a 'massive challenge', because they meant firms had to integrate multiple complex IT systems.
'This survey shows that progress in implementing appropriate ownership, governance and controls is particularly slow. The shifting EIOPA deadlines have offered excuses but these will be viewed as fundamental failings and now require prompt attention,' he added.