British insurers are better placed than their European counterparts to deal with the new Solvency II regime, according to a new study by Tillinghast.
Ian Farr, principal at the Towers Perrin business, attributed UK insurers' confidence to the FSA's Individual Capital Adequacy Standards (ICAS) regime: “UK insurers clearly feel better placed as a result of regulatory changes introduced by the FSA in advance of Solvency II. Their focus is now on developing the right tools to suit the new environment.”
The survey revealed stark differences between continental European and British insurers about the risk management steps they needed to take in advance of Solvency II. According to the risk managers surveyed:
• Enhance risk quantification capabilities (76% continental Europe, 41% UK)
• Enhance risk governance and organisation (61% continental Europe, 19% UK)
• Improve risk identification capabilities (52% continental Europe, 15% UK).
Farr added: “The increased risk sensitivity and flexibility that Solvency II provides will trigger greater product innovation, more innovative capital management, capital raising and financing structures.”
The report also highlighted that insurers are taking risk management more seriously.
The percentage of risk managers required to report at least once a year to their board of directors increased from 84% to 92%. And over half of the respondents indicated they report at least once a quarter.
Directors' recognition of the role of risk was also evidenced by 43% of respondent firms employing a chief risk officer.
Prakash Shimpi, practice leader with global responsibility for enterprise risk management (ERM) at Tillinghast, commented: “As risk issues have gained importance, so has the role of the chief risk officer. Insurers are not only examining risk more closely, but they are also holding executives more accountable for the results.”
60% of risk managers surveyed use ERM as a decision-making tool.
