IGREA welcomes Solvency II but warns against overburden on insurers

In a note released on its website, Iniciativa Gerentes de Riesgos Españoles Asociados (IGREA), Spain's association of insurance buyers, said that it supported the European directive's goal of strengthening the solvency positions of insurers and reinsurers. The association also hailed the notion that Solvency II, differently from its predecessor, focuses on risk management practices of insurance companies, rather than their business volumes. “We agree with the new regime, as we believe it is an important and positive step forward for the regulation of the insurance market,” said Juan José Gil Sánchez, a member of IGREA's executive board. “We believe it institutes a model that fits better the current situation.” But the note also highlighted some aspects that regulators must take into account to prevent the new rules from having a negative effect on the market.hideIGREA believes, for instance, that Solvency II must reduce to a minimum additional administration and reporting costs that insurers will incur in order to meet the new capital requirements, in order to prevent ‘an increase of costs that, ultimately, would be felt by insurance buyers’, the note said. The same goes for the extra costs to be imposed on industry regulators by the directive, the note continued. In this case IGREA is concerned that the most affected would again be insurance buyers as well as society as a whole. ‘Regulation that is too prolix could result in an increase of regulatory activity that is not convenient and in cause higher levels of uncertainty among the entities subject to the regulation’, stated the note. “We share the concerns that the insurance market has made public in the past two years concerning the need for insurance and reinsurance companies to raise their capital levels,” Mr Gil said. IGREA also advocates that Solvency II must work as a tool to boost the offer of insurance products and services in Spain and in the European Union as a whole. To achieve such a goal, it has to clearly specify the equivalence principles that will be demanded from regulators from outside the bloc, the note said. Finally, Spanish buyers want the regime to cement the application of the proportionality principle that, in the words of the association, demands the protection and promotion of small and mid-sized insurers, as well as insurance and reinsurance captives. ‘All these entities increase efficiency in the market and diversify the options for insurance coverage’, the note concluded. The last point is particularly important in Spain, according to Mr Gil. “The Spanish market is composed of a large number of insurers, and many of them work with a limited portfolio of products,” he said. “For IGREA, it is very important that Solvency II preserves competition in the insurance market. We believe that it is necessary to enhance the role played by the proportionality principle, so that mid-sized and small insurers, as well as captives, can stay in the business. But the current state of the rules puts in question the survival of some companies that are less expanded, less diversified and smaller in size.” IGREA, which was created last year by a group of dissidents from AGERS, Spain's risk management association, had a meeting in early November with Unespa, the country's insurance industry association, to discuss Solvency II. Members of IGREA's executive board met with UNESPA's chairman, Pilar González de Frutos, and general secretary, Mirenchu del Valle. Along with Dirección General de Seguros y Fondos de Pensiones (DGSFP), the insurance market regulators, UNESPA organised a number of meetings with interested parties at the beginning of the month to explain the new directive. The association has also promoted the participation of Spanish insurers in QIS5, and expects at least 150 entities to take part in the tests. According to a Unespa spokesperson, although the final numbers have not been compiled yet, the participation of Spanish insurers in QIS5 has been higher than in previous rounds. About 400 people attended an event in September where Unespa explained how to participate in the latest tests. In Spain, insurers will have to adapt in the near future not only to the new European directive, but also to a new insurance contract law that is being drafted by legislators and is expected to be presented to the government soon. Ideas under study include the creation of tighter time limits for insurers to present a damages payment proposal to clients that make a claim. For their part, the insureds are expected to be given more leverage to make their claims in lines like property damages, according to media reports.

IGREA welcomes Solvency II but warns against overburden on insurers

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