RSA boss: 'Solvency II will cost us £20m in 2013'

RSA chief executive Simon Lee says he is worried about the ‘cost and complexity’ of Solvency II, which will cost the insurer £20m this year alone.

Lee, speaking at the The Insurance Summit 2013, run by The Economist with Insurance Times as a media partner, said: “While delayed it is still going to cost us £20m in 2013. That is a cost and complexity that continues to worry me.”

Lee said that Solvency II reminded him of when he used to play cricket and then go for a meal with the team. Everyone ordered food at an Indian restaurant, but soon enough the orders changed and the meal ballooned in size as everyone got involved.

“Unfortunately that metaphor has legs. You end up with enough food that 11 people were never going to eat it. I fear that is what is going to happen with Solvency II,” he said.

Asked if he thought Solvency II would eventually have a positive outcome for insurers in creating a more robust capital framework resistant to failure and protection for the customer, Lee said at this stage “it is too difficult and early to predict”.

Shoot first and ask questions later

Lee said he was also concerned about the approach of the incoming Financial Conduct Authority (FCA). Chief executive Martin Wheatley said in a keynote speech at an ABI conference in September last year, that his new regime would “shoot first and ask questions later”.

“I worry that it will have a negative unintended consequence of damaging transparency,” he said.

Lee told the audience that good regulation would come from the authorities having quality people with good judgement, and then the organisations under regulation being transparent.