But UK firms in better position for Solvency II than European counterparts
Lloyd’s has criticised European authorities for forcing insurers to hoard capital for Solvency II.
Lloyd’s director and general counsel Sean McGovern said the “penal” regulations would force insurers to double existing capital requirements.
He believed the quantitative approach of the Committee of European Insurance and Occupational Supervisors (Cieops) – the body set up by the European Commission to oversee Solvency II – had distracted the industry from meeting other requirements imposed by Pillar II, the risk management and governance element.
McGovern added that UK insurers were in a better position than those in other countries because they already had experience from meeting FSA individual capital assessment requirements.
Speaking at the European Insurance Forum in Dublin, he said: “It would be wrong for any UK insurers to be complacent.”
He also warned that it was “dangerous” for insurers outside the EU to remain ignorant of the requirements of the new directive, due to be implemented in 2012.
The requirements were “ahead of their time” and represented the future direction of insurance regulation.
Solvency II working group chairman Jan Piekoszewski said the implementation date was “tough but reasonable”. He believed that some flexibility would be likely as nobody would be completely ready by 2012.
Ireland’s head of financial regulation Matthew Elderfield warned that the new directive would require rigorous scrutiny of internal models.
“In cases of high impact insurance companies that are proposing to rely on the use of internal models, I will be encouraging such a challenging approach, particularly if significant reductions in solvency requirements are at stake,” he said.
“ We are prepared to hand out pass marks, but only if insurers have done their homework properly.”