The European Unions upcoming Solvency II capital rules are viewed begrudgingly by UK insurers and considered a necessary evil, according to a survey by audit and advisory firm Grant Thornton.
In a poll of 77 senior executives, including chief actuaries and chief risk officers working in the UK general, life and health insurance markets, Grant Thornton found that almost two-thirds (65%) believe the value added by the new requirements will not justify the expenses incurred.
Three-quarters considered the costs of Solvency II to be disproportionate, while only 6% of respondents believe the costs to implement the new regulation is reasonable.
Simon Sheaf, head of actuarial and risk at the firm, said: 'Increasingly, the sector is begrudgingly accepting Solvency II as a "necessary evil", and recognising that it will bring some benefits.
'However, it is clear that they do not believe that those benefits will be significant enough to justify the costs.
'The volume of work and resources that have gone into preparations for Solvency II compliance have been outstanding and insurers have substantial reservations regarding the impact this has had on their business.'
Other constraints in implementing Solvency II were ambiguity over the requirements of the rules and a lack of resources.
Respondents also pointed to data issues, a lack of understanding of the new rules and insufficient board engagement as other barriers to implementation.
Sheaf added that the industry had largely been in favour of the principles behind Solvency II for some time.
But he said that the lack of transparency around Solvency II implementation deadlines and precise requirements were continuing to make the 'pill-swallowing an even more bitter exercise'.
'Businesses rely on certainty, and despite the role of risk in the insurance industry, the sector still feels as though it's being unnecessarily burdened by the complexities of Solvency II,' Sheaf said.
The majority of participants surveyed were optimistic about the new implementation date, with 76% agreeing that it would 'go live' on January 1 2016, while around 98% of respondents said their organisations would be ready to do so if necessary.
However, nearly two fifths believe that less than 70% of their industry peers would be ready to implement Solvency II on the required date.
