Aon Benfield, the global reinsurance intermediary and capital advisor of Aon Corporation (NYSE:AON), has released new findings that show 60% of European insurers attending its recent International Analytics conference think 2014 would be a better starting date for Solvency II. By contrast, 31% of the delegates did not want to see the starting date delayed and are working towards the January 1, 2013 deadline. The remaining 9% thought “maybe” the regime should be delayed.
Aon Benfield is delivering its Solvency II technology and services, including ReMetricaR – an innovative platform for Solvency II internal models – to ensure all clients are prepared for the final rules if the regime is to take effect in 2013.
There could be potential delays to the current timetable as Omnibus II, which modifies the original directive of Solvency II (April 2009), must firstly be passed into legislation before the European Commission can formally adopt the regime’s implementing measures (“Level 2”) and implementing guidance. (“Level 3”). All of these components have to be passed into legislation following the required consultation periods, ahead of Solvency II’s inception.
Meanwhile, insurers are eagerly awaiting guidance on how the Solvency II regime will take shape following their completion of the QIS5 assessment. They are considering different options including the value of an approved internal model and how to juggle the additional resources needed to implement the regulation. Furthermore, the survey also found that insurers have concerns about the level of understanding of their local regulator. The results showed:
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61% of European insurers polled think their regulator is not up to speed with internal models
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54% of European insurers polled think their regulator is not up to speed with underwriting risks, in particular catastrophe risk
To ensure the industry is prepared, Aon Benfield is working with insurers to:
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develop their Solvency II strategy for key risks, such as market risk and non-life catastrophe risk
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maintain regular contact with their local regulator to understand and comply with their approach
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optimise the reinsurance programme and in particular support the increase in appetite for aggregate covers
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use enterprise risk management (ERM) expertise to ensure compliance with Pillar 2 and 3
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create internal capital models using ReMetrica and Impact Forecasting, Aon Benfield’s catastrophe model development centre of excellence, for catastrophe risk.
Marc Beckers, head of Aon Benfield Analytics in Europe, Middle East and Africa, said: “Insurers are juggling a plethora of pressures to comply with Solvency II. We are helping clients to prioritise their efforts by concentrating on the areas that really impact their capital charge. For example, the Cat Task Force has been forced to review the standard formula for non-life catastrophe risks as the results were deemed too volatile. However we have little hope for fundamental change before the start of Solvency II.”
Gareth Haslip, head of Aon Benfield’s Risk & Capital Strategy team in Europe, Middle East and Africa, added: “Insurers need to take strategic decisions and be prepared to change their business model in order to be ready in time. By meeting the 2013 deadline, companies that have a good grasp of Solvency II will have more time to focus on how best to operate their business for the benefit of their shareholders in this new environment. Being prepared will also bring a competitive advantage.”
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