QIS5 exercise due to kick off in August

The European Commission has published the specification for its final Solvency II dry run.

Quantitative Impact Study (QIS) 5 is intended to be the last in a series of exercises designed to test how the pan-European insurance directive will work.

Charles Garnsworthy, a partner at PricewaterhouseCoopers said that there had been little change since May’s publication of the draft QIS5 specification, which saw a watering down of the capital requirements previously proposed by Euro-insurance regulator Ceiops (Committee of European Insurance and Occupational Pensions Supervisors).

Alex Marcuson, non-life insurance partner at Deloitte commented:"Many non-life firms will see a minimal reduction to their liabilities in return for a very considerable increase in process complexity, coupled with a new source of balance sheet volatility. Numerous non-life firms do not hold many non-government bonds, so this is a risk that management may be relatively unfamiliar with.”

“On the other side of the balance sheet, the grouping of some types of own funds has been amended, with deferred tax assets being downgraded to tier 3, but certain grandfathered funds being eligible for consideration as tier 1 and 2.”

The QIS5 exercise is due to commence in August with Ceiops publishing a report in the autumn on the results of the exercise which will feed into the final directive.