Reforms are “out of proportion to the problems”, say buyers
The Solvency II reforms as currently proposed would reduce the amount of insurance capacity available to UK businesses and put up the cost of cover, AIRMIC (the Association of Insurance and Risk Managers) has warned.
Companies would have less money to invest in their businesses and would buy less insurance, leaving them more exposed to big losses.
AIRMIC reiterated its support for the original principles of Solvency II, but said that the reform was imposing burdens out of all proportion to the problems it was addressing.
John Hurrell, chief executive at AIRMIC said: “The sharp increase in capital requirements for insurance companies under Solvency II means that there will be less choice of insurance, less flexibility and greater cost.
“Insurance companies do not pose systemic risk to the economy and, unlike many banks, they have not been found wanting in the recent financial crisis.
“Our members are concerned that they’re going to take a lot of pain for very little gain when buying insurance for their organisations. There’s a feeling that the EU is addressing a problem that doesn’t exist.”
Insurers are resilient
Hurrell cited a recent report by CEIOPS (the committee of national regulators overseeing Solvency II), which tested the resilience of the insurance sector under several scenarios.
The results of the exercise indicated that the large European insurance groups would remain resilient as currently capitalised even in the most severe scenarios.
He also drew attention to the effects of Solvency II on captives. “Captives are a valuable tool that help to improve risk management and reduce the cost of insurance, but Solvency II would make them more expensive to run and far more bureaucratic,” he said.
“I would urge the EU to return to basics and the original intentions of Solvency II, which was to ensure that insurers are well run, transparent and sufficiently well capitalised for the risks that they carry.”