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Solvency II: Side Effects - PowerPoint PPT Presentation

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

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Solvency II: Are We There Yet?

December 2010 presentation by

Claude Penland, Associate of the Casualty Actuarial Society

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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

  • More info at

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Solvency II Side Effects, Part One

  • Insurers might need to outsource their asset management

  • Stock portfolios sold off

  • Captives might need to be run off

  • Specialist employee costs are being jacked up

  • Not enough regulators with experience

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Solvency II Side Effects, Part Two

  • International Financial Reporting Standards and Solvency II hit companies twice and from different angles

  • Demand for bonds may be driven artificially high (and yields low) due to dumping of equities and buying of bonds

  • Cost overruns

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Is Catastrophe Risk Appropriately Represented?

  • Mega Broker says no

  • Aon Benfield says no

  • Perils says that’s a mighty big catastrophe that insurers are expected to be prepared for

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Solvency II Committees

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

  •

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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.

  •

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Final Points

  • Most recent Solvency II test results might be released in March 2011

  • Japan, Switzerland and Bermuda are going through “equivalency tests”

  • Expect M&A

  • Expect Redomiciles