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News from Members Nearly 80% of European insurers are on track to implement Solvency II

Nearly 80% of European insurers are on track to implement Solvency II

by EY May 13, 2014

Website www.ey.com



► Reporting requirements for Pillar 3 still represent a major challenge
► Insurers are looking for better support from the regulators

Nearly 80% of European insurers expect to meet Solvency II requirements before January 2016, according to EY’s European Solvency II Survey 2014. Overall, Dutch, UK and Nordic insurers are the best prepared, while French, German, Greek and East European (CEE) insurers are less confident.

The survey of 170 insurance companies, conducted in the Autumn of 2013, is an update of EY’s 2012 pan-European survey and spans 20 countries including Europe’s largest insurance markets.
The findings reveal a consistently high state of readiness to implement the Pillar 1 balance sheet and fulfill most of Pillar 2, systems of governance, but Pillar 3, the reporting requirements, still presents a major challenge.

Postponing the Solvency II regulatory deadline to 2016 has bolstered insurer confidence that they can meet the requirements in the time frame. However, as companies become more realistic about their implementation readiness, it is clear that some are less prepared than they had expected - many simply delayed their plans by at least one year, which might cause them issues now. While insurers are sending a strong message that they are seeking to improve their risk management effectiveness, they have a long way to go in terms of reporting, data and IT readiness.
Generally well prepared for Pillar 1; more work needed for Pillar 2

Insurance companies appear to be generally well prepared on all aspects of Pillar 1, with French, Dutch and Italian companies approaching compliance and Greek, Portuguese and Central Eastern European insurers showing a lower level of readiness. However, nearly 85% of respondents see room for improvement in the effectiveness and/or efficiency in meeting Pillar 2 requirements. Insurers know that they need to tackle embedding risk culture at the front line more effectively.


Generally well prepared for Pillar 1; more work needed for Pillar 2

Insurance companies appear to be generally well prepared on all aspects of Pillar 1, with French, Dutch and Italian companies approaching compliance and Greek, Portuguese and Central Eastern European insurers showing a lower level of readiness. However, nearly 85% of respondents see room for improvement in the effectiveness and/or efficiency in meeting Pillar 2 requirements. Insurers know that they need to tackle embedding risk culture at the front line more effectively.
Two-thirds of internal model users expect approval at the start of Solvency II

Given the two-year delay in Solvency II implementation, insurers appear more confident in the approval of their models for day 1 use; 67% of the companies surveyed believe they will be ready. This reflects the extra time they have had to finalize their programs.

As a general trend, the proportion of insurers planning to use a (partial) internal model has dropped since our previous survey. However, partial internal models have shown the most noticeable reduction, and companies adopting full internal models are more likely to be continuing with their plans.
Better support needed from the regulators

While the overall frequency of interaction with regulatory bodies is considered largely adequate, insurers expect more in terms of support in the interpretation of regulatory requirements (79% are not satisfied) and in terms of the amount and quality of feedback on company-specific implementation (75% are not satisfied). This might reflect the fact that supervisors are understaffed as they cope with the new regulation. In addition, 61% of the surveyed insurers are not completely satisfied with the size of their supervisory teams.
Andrei Tudor Rațiu, Senior Manager, Advisory Department, EY Romania adds: "In terms of the stage of implementation in Romania, we see a similar integration status to the one identified at European level. The vast majority of companies, subsidiaries of foreign companies, follow the policy and implementation process designed by the parent company, while local companies have already started the implementation steps.

Until the implementation of the new solvency requirements in Romania, we expect substantial efforts made by companies in the following areas:

1) Adjustment of IT systems and data necessary to calculate the required figures for Pillar 1 and, especially, meeting reporting requirements under Pillar 3;
2) Implement the requirements of the new regime in the day to day activity of the insurance company and in making strategic decisions at the management level;
3) For subsidiaries of foreign companies, adjusting work already undertaken by the group to meet market specifications in Romania and, especially, to meet the company’s risk profile."


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About EY Romania
EY is one of the world's leading professional services firms with approximately 175,000 employees in 728 offices across 150 countries, and revenues of approximately $25.8 billion in 2013. Our network is the most integrated at global level and its vast resources allow us to help our clients benefit from every opportunity. In Romania, EY has been a leader on the professional services market since its set up in 1992. Our over 450 employees in Romania and Moldova provide seamless assurance, tax, transactions, and advisory services to clients ranging from multinationals to local companies. Our offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau. From 1 July 2013, Ernst & Young becomes EY, the logo has been modified in response to this change and the company's new tagline becomes "Building a better working world". The new visual identity reflects the new strategy of EY, Vision 2020. For more information, please visit www.ey.com.

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