Delays, unknown costs and potential for stifled growth – are there any supporters left for Solvency II?

It has been an interesting week for Solvency II.

Yesterday ABI director-general Otto Thoresen said that the forthcoming EU legislation could put European insurers at a disadvantage. Then, this morning retiring Hiscox chairman Robert Hiscox told the Today programme that insurers could become too reliant on the framework and rules of Solvency II, and ignore their gut instinct.

This week also saw the FSA warning the UK to prepare for a January 2014 implementation date for Solvency II, while the UK’s biggest insurance company Prudential revealed that it could relocate to Hong Kong because of the regulation’s tough rules on capital requirements.

Money worries

It’s clear that the total cost of Solvency II compliance is becoming more of a worry for insurers.

The programme has been hit by several delays that have taken their toll on insurers, with Financial Times Deutschland reporting that Solvency II may be delayed further with a 2016 implementation date.

Meanwhile Thoresen said that EU draft proposals could stop insurers from “driving growth in the UK and making long-term investments that generate growth”.

One further problem is that the total cost of Solvency II to insurers is still unknown, even excluding further delays.

Stifling activity

The FSA’s announcement came as little solace to insurers, basically telling them to get on and prepare for a 2014 start date, regardless of how short the period between transposition and implementation is.

This effectively puts more pressure on the smaller insurers, as the larger insurers and Lloyd’s players are more than prepared for the changes.

The delays to Solvency II hit smaller insurers again, because analysts believe these hold-ups are stifling mergers and acquisitions in the area.

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