Solvency II implementation is possible by 2016 but delays hurting risk market says Van Hulle

Mr Van Hulle is optimistic that the latest negotiations over Solvency II in Brussels, which began in September and will resume again in late October, are making progress. THE LAST LEG “I expect and urge those involved in the negotiations to take that last step—the last mile is the most difficult but it is crucial. It’s a question of credibility and the industry needs Solvency II,” he said at the Ferma Forum yesterday. Solvency II, which was due to be implemented in 2014, is, in part, being delayed because of issues exposed by market turbulence during the financial crisis. They are being addressed in Omnibus II legislation that is designed to amend the original directive.hideThe legislation has also been delayed by intense lobbying. Insurers that once welcomed Solvency II have since backtracked on some aspects they no longer like, such as the use of market consistent valuations, explained Mr Van Hulle. However, once these issues are resolved, Solvency II implementation should move quickly, he said. Giving the keynote speech on the first day of the conference, Mr Van Hulle said the insurance industry will become increasingly important as the world becomes more risky. He warned: “Without sound risk management and a risk-based solvency regime, insurers will not be able to deliver. They will lack the data and tools to know that they can honour their commitments.” Further delays to the implementation of Solvency II could compromise the ability of European insurers to deliver protection for their clients, Mr Van Hulle said. Insurance could help society cope with risks like ageing populations, climate change and emerging technologies, he added. He also encouraged insurers not to slow their preparations for Solvency II. He noted the recent publication of guidelines by EIOPA, the body that oversees national regulators in Europe, will require supervisors to report back publicly on their progress in implementation of aspects of Solvency II, including risk management requirements and the approval of internal models. “These guidelines will make the industry change. Some companies have stopped their preparations for Solvency II, but now is the time to go on and follow the path of good risk management,” he said. Mr Van Hulle, who now lectures at the Business and Economics Faculty of the Katholieke Universiteit Leuven and at the Economics Faculty of the Goethe University in Frankfurt, said that the insurance industry is the only major economic sector not to have international accounting and solvency standards. HARMFUL DELAYS The President of Ferma, Jorge Luzzi, said in a statement on Solvency II: “The continuing delays to the adoption and implementation of Solvency II are already creating uncertainty for captive owners who do not know what capital and reporting requirements they will have in future.” Ferma said that it welcomes a rigorous and consistent prudential regime for European insurance companies, but it has repeatedly stressed that the regulations should be proportionate to the risk. “Solvency II should make a clear distinction between insurance companies serving the public and captive insurers whose only business comes from their parent companies,” said Mr Luzzi. “We are also concerned that Solvency II could result in a reduction in the capacity of the market to cover emerging risks and unusual exposures. We fear that some niche insurers, who provide useful specialist capacity, could find their business no longer attractive once they have to meet the new capital requirements of Solvency II,” he concluded.

Solvency II implementation is possible by 2016 but delays hurting risk market says Van Hulle

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