21 November 2013
PA Consulting Group’s Asesh Sarkar, insurance expert, is quoted in an article in Actuarial Post. The article looks at PA’s survey of UK insurers and their readiness for Solvency II. According to the survey, only half of insurers understand the full impact of Solvency II and less than a third have adequate budget in place to complete the programme.
The article reports that, after a long period of uncertainty, 1 January 2016 is now the proposed date for implementation and that this was correctly predicted by nearly three quarters (74 per cent) of insurers who responded to PA’s survey.
The article goes on to look at the issues the survey highlights for the industry if it is to be ready in time. These include:
Pillar I – despite a narrowing window to achieve model approval from regulators, half of insurers have increased the scope of their internal model. With only 45 per cent believing the model will result in lower capital requirements, the business case for internal models should be examined fully before expanding scope further, and for some, a reduction in scope may be more appropriate.
Pillar II – two thirds of insurers do not expect to be ready to meet EIOPA’s preparatory guidelines on the System of Governance by 1 January 2014. Although the guidelines are preparatory and there is no need for a costly or rushed implementation, firms must immediately build a credible plan to achieve compliance.
Pillar III – 80 per cent of insurers expect reporting to start by mid-2015 and almost all (93 per cent) expect to be ready in time. However, there is a risk the industry is underestimating the challenge as, despite the demands of Solvency II reporting, no firm has spent more than 25 per cent of its budget on developing reporting systems with a fifth of respondents spending less than 5 per cent.
Commenting on the report, Asesh says: “As insurers and regulators prepare to step up their Solvency II activity, firms need to ensure their activity – and their budget – is focused in the right places. This means taking a hard look at the value of internal models and ensuring they are investing enough in IT to prepare for Solvency II.
“Delivering programmes as business-as-usual is a workable approach, but firms cannot afford to lose sight of the areas where more rigour and control are required or they risk costly failure.”
You can read the full article here.