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What to do about that medicine they call Solvency II? Side effects on European insurance regulation discussed. Also see SolvencyDeux.com

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Solvency II: Are We There Yet?

December 2010 presentation by

Claude Penland, Associate of the Casualty Actuarial Society

www.ClaudePenland.com


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What is Solvency II?

  • Solvency II is the updated set of regulatory requirements for insurance firms that operate in the European Union.

  • See Wikipedia at http://en.wikipedia.org/wiki/Solvency_II

  • More info at www.SolvencyDeux.com


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Solvency II Side Effects, Part One

  • Insurers might need to outsource their asset management http://bit.ly/aeaqhy

  • Stock portfolios sold off http://bit.ly/cZ56br

  • Captives might need to be run off http://bit.ly/cYq7w4

  • Specialist employee costs are being jacked up http://bit.ly/9Mt0J0

  • Not enough regulators with experience http://bit.ly/a7i21O


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Solvency II Side Effects, Part Two

  • International Financial Reporting Standards and Solvency II hit companies twice and from different angles http://bit.ly/9awkgy

  • Demand for bonds may be driven artificially high (and yields low) due to dumping of equities and buying of bonds http://bit.ly/bu3YM3

  • Cost overruns http://bit.ly/cr4tPt


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Is Catastrophe Risk Appropriately Represented?

  • Mega Broker says no http://bit.ly/cHHoGz

  • Aon Benfield says no http://bit.ly/9Dbgt3

  • Perils says that’s a mighty big catastrophe that insurers are expected to be prepared for http://bit.ly/9UENg2


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Solvency II Committees

  • Ironically, they say they must now simplify the plans they’ve charted.

  • Read more at http://www.claudepenland.com/2010/11/30/more-solvency-ii-hand-wringing-coming-out-of-european-mouths/


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European Pensions

  • Pension Funds & Insurers disagree.

  • Pension Funds don’t want to be regulated by Solvency II.

  • Insurers say what is good for the goose is good for the gander.

  • Read more at http://www.claudepenland.com/2010/12/01/european-insurers-versus-european-pension-funds-who-will-win-the-solvency-ii-argument/


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Final Points

  • Most recent Solvency II test results might be released in March 2011 http://bit.ly/aZZF3z

  • Japan, Switzerland and Bermuda are going through “equivalency tests” http://bit.ly/cnA5v1

  • Expect M&A http://bit.ly/ae75Yk

  • Expect Redomiciles http://bit.ly/bnhumt


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