Solvency II ‘lost track of its bigger goal’, says Willis boss

Joe Plumeri has warned that the EU’s Solvency II directive will make risk management more difficult.

In the opening keynote presentation at this year’s Biba conference, the Willis chairman and chief executive said the goals of the upcoming directive were laudable.

But he added that it would force insurers to keep more capital on their balance sheets to meet claims, particularly on the captives market.

“The concern is that rather than improve the system, Solvency II will make risk management more difficult. I’m sure there are many in this room who believe that Solvency II has lost track of its bigger goal,” he said.

Turning to the Insurance Mediation Directive (IMD), which the EU is currently revising, he said the industry would welcome “certainty and clarity” from regulators.

And he used his speech to raise the issue of whether the FSA should have regulated Quinn more rigorously.

“Will the FSA change its regulations to impose more stringent oversight on grandfathered insurers?

“Financial fortunes, like Quinn’s, are slowly built over decades but can blow up in a matter of months. Quinn Insurance was profitable and expanding in the UK, but its connection to the wider Quinn Group has brought it to this point.

“When it comes to insurance, and the trust that policyholders place in insurers that their claims will be paid, adequate protection must be in place.”

He also commented that US regulators, like their UK counterparts, did not grasp the differences between banks and insurance companies. “They misunderstand that it’s the banks that went under.”

And he issued a strong defence of his company’s controversial decision not to take contingent commissions. “As the world becomes more risky, then more people will appreciate what we do. We have to be transparent,” he said.

Turning to the recent formation of a coalition government in the UK, he said: “This type of power sharing has not been tried for 65 years – and for good reason.” He added that London retained its position at the “heart” of the global insurance industry.