Today (Thursday), the ABI holds its Solvency II implementation conference. We spoke to the association’s director-general Otto Thoresen and director of prudential regulation and taxation Hugh Savill about the state of play on the oft-delayed Euro-directive
This year has seen further hold-ups to the implementation of Solvency II, which is now scheduled to come into force in 2014. With all the current economic uncertainty, should it pushed into the long grass?
OT “After a long period of development, the starting line for a Solvency II world is now in sight. The most important thing now is to maintain momentum and deliver. There’s still a lot of detail to be ironed out , but it’s very important that the regime is allowed to find its way into the real world. It’s now in pretty good shape.”
HS “Most of the rules are in a pretty advanced stage of development, although we still want improvements on counter-cyclical premiums.”
Does the eurozone crisis require a rewriting of Solvency II?
OT “The environment in which it’s going to be delivered is one that nobody would have predicted all those years ago when we started the journey.”
HS “Solvency II is going to come into being in a very different world from where it was invented, but we don’t need to change Solvency II to do something about sovereign debt. They have mechanisms to deal with this issue in Solvency II through companies’ internal models which
reflect the risk impact to that company or through
standard models.”
What happens next?
HS “The European Parliament will vote on amendments to the framework to Omnibus II between 19 and 22 December. There will then need to be negotiations between the Council of Ministers and Parliament.”
“It’s more difficult for smaller companies: the burden of reporting requirements in smaller companies is out of proportion.”
What kind of impact will Solvency II have on how insurers are rated?
HS “We are ready for it, but we are not certain that the capital markets have understood what it means.
“Insurers are going to have to learn to live in a rather more transparent world than they do at the moment. The relationship between the insurers and the capital markets is going to change. They will have a lot more granular detail (about companies).”
How helpful have the regulators been to work with over Solvency II?
OT “There has been a constructive engagement with the Prudential Regulation Authority, as it will be. There is a pragmatic approach being taken here which is very encouraging.”
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