Solvency II delays will hurt European insurers and compromise their ability to deliver protection for their clients in a riskier world, a senior pensions and insurance expert warned today
30 SEPTEMBER 2013 | BY JUDITH UGWUMADU
Professor Karel Van Hulle, who retired as head of pensions and insurance at the European Commission in March, was addressing the Risk Management Forum of the Federation of European Risk Management Associations (FERMA) in Maastricht. He said that Solvency II was now less likely to be implemented before 2016. Delays have been caused by the failure to agree on Omnibus II, the legislation underpinning the regulations.
'[European insurers] will lack the data and tools to know that they can honour their commitments,' said Van Hulle.
'The insurance industry will become increasingly important in this risky world but without sound risk management and a risk-based solvency regime, insurers will not be able to deliver.'
He urged the European Parliament, Council and Commission to resolve the outstanding issues on Omnibus II by next month.
'The insurance sector is the only major economic sector for which there is so far neither an agreed international accounting standard nor an agreed international solvency framework,' he continued.
In the interest of all stakeholders, this should be an area where Europe could show leadership, said Van Hulle.
At the meeting, FERMA president Jorge Luzzie agreed that delays to the adoption and implementation of Solvency II were creating uncertainty for 'captive owners'. He said the problem arose when owners did not know what capital and reporting requirements they would have in the future.
'Solvency II should make a clear distinction between insurance companies serving the public and captive insurers whose only business comes from their parent companies,' said Luzzi.
Although FERMA welcomes a rigorous and consistent prudential regime for European insurance companies, the organisation stressed that the regulations should be proportionate to risk.
'We are also concerned that Solvency II could result in a reduction in the capacity of the market to cover emerging risks and unusual exposures,' said Luzzie.
'We fear that some niche insurers, who provide useful specialist capacity, could find their business no longer attractive once they have to meet the new capital requirements of Solvency II.'
However, new guidance for insurers and regulators on how they should prepare for the Solvency II risk-based supervisory system was published last week by the European Insurance and Occupational Pensions Authority.
The authority has permitted a 'phasing in' approach for insurers and regulators, but said national supervisory bodies would be expected to ensure insurance companies and groups took active steps towards implementation.'