SII to bring less service and more costs, global programmes not up to scratch says IFRIMA boss

He expressed satisfaction that the implementation of Solvency II will take longer than originally expected, following its postponement to 2014, as in his view the new directive is not going to help risk managers. "The good news about Solvency II is that it has been delayed again," he said. Since Mr Leeman delivered his speech this week it has been reported that Solvency II may be delayed yet further until 2015. (See related story) Mr Leeman refuted the argument, often branded by regulators, that the directive will protect buyers by reducing the risk that insurance companies will become insolvent and end up not paying their dues.hideHe noted the insurance sector has shown remarkable financial health in recent times and could not be tested more stringently than by the series of catastrophes around the world over the past two years. Despite all the losses suffered the sector has remained financially sound. Mr Leeman forecast that the implementation of the directive will actually cause a reduction of capacity in the market. Long tail risks will become more difficult to service and there will be a lower number of insurers for buyers to choose from, he said. Insurance companies will also have less appetite for risk, he said, while at the same time they will feel less able to come up with creative solutions, as their focus will increasingly be on compliance rather than on innovation. "They have promised us a better world, but what we will get is less service for a higher cost," Mr Leeman said, referring to European regulators. But Mr Leeman had harsh words for the insurance market when speaking about the need for better solutions for global programmes. This is a matter of particularly concern to multinational companies that need to integrate their master policies with local coverages in Latin American countries like Brazil. He noted that the best risk managers can hope for today is good local coverage in their home country and a blend of allegedly good local standards, or locally registered wordings, in other countries. But that means buyers can only 'hope and pray that this will suit their needs," he said. He added that this results in DIC/DIL coverages that are often illegal, or with partial coverages that also frequently fall foul of the law. "We do not want to act illegally or end up in prison because our coverage is not compliant," Mr Leeman said. But insurers have not been able to deliver the goods, he continued. He conceded, however, that insurers do face challenges when attempting to provide adequate solutions for global programmes. "We know it is not an easy task to give us what we want, among other things due to local regulations and protective measures in some countries." Mr Leeman also said that risk managers should be at a high enough level in their organisations to be able to inform insurers, in full, about the risks their companies face and the exact extent of those risks. And he expressed support for a global database on tax and compliance risks that companies can use when tackling the issue of structuring global insurance programmes. The formation of such a database is currently under discussion. Earlier this year Airmic, the UK's risk and insurance management association, reported a 'healthy response' to the Request for Proposal it issued along with the London International Insurance Brokers Association (LIIBA) and Ferma that invited potential service providers to show an interest in delivering a Database of International Insurance Requirements.

SII to bring less service and more costs, global programmes not up to scratch says IFRIMA boss

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