Almost 80% of European insurers expect to fully meet all Solvency II requirements before the January 2016 deadline, according to financial consultants EY.
Its European solvency II survey 2014,published today, polled 170 insurance companies in 20 countries and found that the Dutch, UK and Nordic insurers were the best prepared, while the French, German, Greek and East European (CEE) insurers were less confident.
In October, the European Commission postponed the application date of the Solvency II Directive to January 1 2016.
The survey indentified a high state of readiness with the French, Dutch and Italian companies to implement the Pillar I balance sheet. However, nearly 85% of those polled said they see room for improvement in the effectiveness and/or efficiency in meeting Pillar II requirements, which cover systems of governance, risk management and supervision requirements.
Martin Bradley, EY's global insurance risk and regulations leader said: 'Insurers know what they need to tackle embedding risk culture at the front line more effectively.'
Another key element of Solvency II was the Own Risk and Solvency Assessment (ORSA), a Pillar II risk-management requirement that insurers must use to assess their own short- and long-term risks and the amount of own funds necessary to cover them. The survey found a significant spread in readiness from the Netherlands, Nordics and UK, with Greece, Portugal and CEE less prepared.
But Pillar III, which relates to disclosure and transparency was a major challenge for insurers, said EY noting that around 70% of the respondents had registered little progress.
Bradley said: 'The level of implementation readiness [in Pillar III] has made little progress since 2012. Uncertainty in implementation and timing delays may explain the lack of progress but it is now critical to accelerate these projects in 2014. Given the current status, the reality for many is that the 2015 transitional reporting will need to be done largely on a manual basis.'
EY also highlighted that data and systems readiness for Pillar III continued to lag behind Pillars I and II. Only 25% of insurers had selected or designed a system to meet Pillar III requirements and 66% of respondents stated that data systems were not designed to support ORSA assessments beyond the normal reporting cycle.
Bradley added: 'Insurers are sending a strong message that they are seeking to improve their risk management effectiveness, they have a long way to go in terms of reporting, data and IT readiness.'
Given the two-year delay, two-thirds (67%) of insurers appear more confident in the approval of their internal model for day one use and believe that the extra time would help them to finalise their programmes.
However, insurers want more support from the regulators in the interpretation of requirements. More than three-quarters (79%) are not satisfied with the current frequency of interaction and a similar proportion (75%) said they were satisfied in terms of the amount of feedback on company-specific implementation. In addition, 61% of insurers surveyed said they were not completely satisfied with the size of their supervisory teams.
Earlier this year, the European Insurance and Occupational Pensions Authority, issued its Implementing Technical Standards timetable, which aims to ensure uniform application of Solvency II between insurers and regulators ahead of the directive's application on January 1 2016.