'Would Solvency II have saved Quinn?'

Even for a global insurer, £20m is a lot of money. But that’s how much Solvency II will cost RSA this year.

Revealing the figure, chief executive Simon Lee likened Solvency II to his cricketing days when the team would go to an Indian restaurant post-match. Every team member would order all their favourites and the result was way too much food. He’s alluding to the way Solvency II is being pushed and pulled in so many different directions by vested interests that it has become a regulatory quagmire.

It appears that Solvency II, which at its heart should be simple enough in matching capital to risk, has become too complicated to implement across all 27 member nations of the EU.

But even if Solvency II were implemented tomorrow, how many of the modern-day insurance failures would have it prevented? Would it have saved Independent or Quinn? Probably not. They failed because of mismanagement.

Ultimately, Solvency II is costly, with unknown outcomes in preventing the failure of insurance companies. No wonder chief executives across Europe are lining up to criticise it.

Motor market update

In other news, the consequences of the Competition Commission inquiry and the Legal Aid, Sentencing and Punishment of Offenders Act 2012 are having major effects on the thinking of UK insurers.

In personal lines, Zurich chief executive Stephen Lewis says the insurer will operate for profit rather than growth. The market is going through a period of turbulence as legislation and regulation come together to quell the rise in bodily injury and credit hire costs.

Others are playing a different game. With motor rates falling, it is clear many insurers are still pricing aggressively in a market still not over its issues. It’s a risky ploy, especially as many insurers appear to have used up their reserves.

Countering this, fraud-busting technology and data-led underwriting have helped assess risk more accurately. Major insurers’ personal lines results will be interesting this year.