Insurers on track for Solvency II, says EIOPA study

The results of the QIS5 study, announced yesterday by the European Insurance and Occupational Pensions Authority (EIOPA) show that insurers remains well capitalised, according to Towers Watson.

In cooperation with the European national supervisory authorities, EIOPA evaluated the data that was provided by European insurance companies and groups between July and November 2010. The results will ultimately feed into the European Commission’s further development of the new regulations and help to shape the final Solvency II landscape.

Towers Watson warned, however, that insurers with €86 billion less capital surplus will struggle under Solvency II unless internal models applied in preparation for the new regulations.

But the results showed that overall the insurance industry remains well capitalised under the QIS5 study.

Colin Murray, director at Towers Watson, said: “The results largely bear out our expectations from our work with clients. We welcome the fact that EIOPA clearly recognises the main outstanding issues in relation to the standard model and is working hard to resolve these. Nevertheless the timescales for resolving these issues is very tight and we would urge their swift resolution.”

The QIS5 results revealed other important areas, according to EIOPA, which were not tested but require further attention of the industry in preparing for Solvency II. These areas are governance, risk management and reporting requirements.

Colin Murray said: “Solvency II is not just about risk measurement and quantification. Successfully responding to this new regulatory regime will depend much on the degree to which companies recognise and respond to their governance and risk management needs ahead of the 2013 deadline.”