“There is a lot of uncertainty about how this is going to work,” says Michaela Koller in what is probably one of the biggest understatements of the year

The director-general of the CEA, the European insurance federation, is referring to the implementation of the regulatory mess that is Solvency II.

When Insurance Times spent the day in Brussels, it found a plethora of problems – and there are fewer than 18 months until D-day. Top of the list was the amount of additional capital that has to be held by insurers. The ABI has continually voiced displeasure at this, but to no avail. Scare stories have ranged from having to place up to 50% more capital on specific lines of business, to end-users facing premium increases of more than 30%.

Then there is the issue of the timetable and the testing procedures that have taken place so far. Insurers have already been forced to pay millions to ensure compliance, simply because strategy is still unclear: opinions are split between those who want to comply and conform, and those prepared to lead and pioneer.

Slap-bang in the middle of the preparation for implementation, the financial crisis happened, adding to everybody’s problems.

To date, the industry has been geared up to meet a set of quantitative impact-testing studies from the regulator. These, however, have been widely criticised for being unwieldy and complicated. The simple point being made by the insurer lobby is that during critical times the global insurance framework did not fail. It says that any new system ought not to be built to a zero-failure scenario, as this could be too onerous and damage a system that, largely, is already working well.

On top of all of this, a set of new international financial reporting standards is being introduced which could result in volatile balance sheets. These could act to further distort the international picture.

Solvency II is definitely going to happen, but there are still many opportunities for everybody involved to influence exactly how it is going to work.

We as an industry must play our full part. Otherwise, at the end of this lengthy, convoluted process, the list of losers could far outstrip the list of winners. IT