A report from Life Insurance International (LII), a briefing service operated by the British research firm Timetric, has found that there still appears to be some uncertainty among insurers about how to actually implement the Solvency II directives that are meant to harmonize insurance regulation in the European Union.
"Although Solvency II has involved a lot of specifications and guidance, anecdotal evidence suggests that some firms are only now beginning to fully understand the precise computational requirements of Solvency II," reads the report.
Christopher Critchlow, director of professional services at OAC Actuaries and Consultants, told LII that while he believes insurers in the United Kingdom are reasonably well prepared given the very tight timescales regulators have imposed, he is concerned that there is still "a fair degree of uncertainty" about the exact requirements of the new regulatory regime. He says that insurers do not know if they should take a comprehensive approach or try to act pragmatically. As a result, the LII report suggests that insurers will pay more attention to the nature of the risks they write and will try to diversify rather than focus on one particular line of business.
LII also spoke with Clare Bousfield, the chief financial officer at Aegon UK, who indicated that her firm has spent most of the last 18 months dealing with larger issues, such as the matching of long-term liabilities and assets. "She says the biggest challenge about Solvency II is the uncertainty that the industry has had to deal with and getting numerous European regulators to agree on a methodology," concludes the LII report.