Nearly four in five European insurers expect to meet the requirements of the Solvency II prudential regime for the sector before the 1 January 2016 deadline, according to the
‘European Solvency II Survey 2014’
just published by EY, a member of Ernst & Young Global.
The survey finds that Dutch, UK and Nordic insurers are the best prepared, while French, German, Greek and Central and Eastern Europe (CEE) insurers are less confident.
The survey of 170 insurance companies, conducted last autumn, updates EY’s 2012 pan-European survey and spans 20 countries including Europe’s largest insurance markets. The findings indicate a consistently high state of readiness to implement the Pillar 1 balance sheet and fulfill most of Pillar 2, systems of governance. However, the reporting requirements of Pillar 3 still present a major challenge.
“Postponing the Solvency II regulatory deadline to 2016 has bolstered insurer confidence that they can meet the requirements in the timeframe,” said Martin Bradley, EY’s global insurance risk and regulation leader.
“However, as companies become more realistic about their implementation readiness, it is clear that some are less prepared than they had expected – many simply delayed their plans by at least one year, which might cause them issues now. While insurers are sending a strong message that they are seeking to improve their risk management effectiveness, they have a long way to go in terms of reporting, data and IT readiness.”
Pillar 1 and Pillar 2:
Insurers appear to be generally well prepared on all aspects of Pillar 1, with French, Dutch and Italian companies approaching compliance and Greek, Portuguese and CEE insurers showing a lower level of readiness. However, nearly 85% of respondents see room for improvement in the effectiveness and/or efficiency in meeting Pillar 2 requirements.
“Insurers know that they need to tackle embedding risk culture at the front line more effectively,” said Martin. “The top four improvements identified by insurers as delivering improved risk management effectiveness all related to interface with the front line, but these changes were also ranked as being the hardest to achieve.”
A further key element of Solvency II, the own risk and solvency assessment (ORSA), suggests that companies in the Netherlands, Nordics and UK are more prepared, with Greece, Portugal and CEE less prepared.
Little progress in Pillar 3:
Just over three in four respondents say they have yet to meet most or all Solvency II reporting requirements – a slight improvement on the 2012 ratio of four out of five.
“The level of implementation readiness has made little progress since 2012,” said Martin. “Uncertainty in implementation and timing delays may explain the lack of progress but it is now critical to accelerate these projects in 2014. Given the current status, the reality for many is that the 2015 transitional reporting will need to be done largely on a manual basis.”
Data and IT readiness:
Data and systems readiness for Pillar 3 continues to lag behind Pillars 1 and 2. Only a quarter of insurers surveyed have selected or designed a system to meet Pillar 3 requirements, and 66% of respondents note that data and systems are not designed to support ORSA assessments beyond the normal reporting cycle.
“Not surprisingly, the decision to freeze or place programmes into ‘business as usual’ means that only limited progress has been made in data and IT across all pillars in the last 12 months,” said Jan Leiding, partner in financial services for Europe, the Middle East, India and Africa at EY. “Rapid gap assessments, prioritisation and strong project leadership are needed to meet deadlines.”
Approval of models:
Following the two-year delay from January 2014 to January 2016 in Solvency II implementation, insurers appear more confident in the approval of their models for day 1 use; with two in three of the companies surveyed confident they will now be ready.
EY reports that the proportion of insurers planning to use a (partial) internal model has dropped since the group’s previous survey. However, partial internal models have shown the most noticeable reduction, and companies adopting full internal models are more likely to be continuing with their plans.
Support from Regulators:
While the overall frequency of interaction with regulatory bodies is considered largely adequate, insurers expect more in terms of support in the interpretation of regulatory requirements (79% are dissatisfied) and in terms of the amount and quality of feedback on company-specific implementation (75% are dissatisfied). This might reflect the fact that supervisors are understaffed as they cope with the new regulation. In addition, 61% of the surveyed insurers are not completely satisfied with the size of their supervisory teams.
The full report may be accessed at www.ey.com/insurance.
Today CGI and GTNews have announced the launch of the fifth annual Transaction Banking survey report, which offers which offers critical insight into the corporate-to-bank relationship.
On-Demand Treasury Management Solutions continue to gain increased adoption in the US and EMEA regions.
Treasurers are being expected to do more work with fewer resources than ever before, so it is little wonder that the automation of day-to-day operations was highly discussed on the second day of EuroFinance, the annual treasury event held in Barcelona this week.
Chicago based Treasury Management System (TMS) vendor GTreasury and Sydney based risk and treasury management vendor Visual Risk have joined forces in a strategic alliance to ... read more