S&P’s European Insurance Symposium Highlights Impending Changes

June 28, 2007

Kathleen A. Corbet, President of Standard & Poor’s, told the audience at its second annual European Insurance Symposium that the insurance sector is at a critical point, with the move to greater transparency, increased use of the capital markets, and new regulation all meaning there is great potential for change.

S&P said that overall it is “cautiously optimistic about the industry’s prospects.”

Corbet noted that the industry had “endured a period since 2001 when the direction of the insurer ratings was markedly downward;” however, “over the past year the trend has reversed.” Her question now is: “Will the industry seize the opportunity to enjoy an era of consistent success, stability, and security without reverting to the traditional boom and bust cycle in the market?”

Yann le Pallec, Head of S&P’s European Insurance Ratings told the audience that the European insurance sector is unquestionably “facing a revolution in terms of the way it is regulated.” S&P’s symposium was geared to giving the industry an opportunity to “come together and discuss the way that the sector might respond to this and other challenges,” le Pallec added. “The insurance sector has been blighted in the past by the severity of the cycle,” he continued, but he also indicated that S&P is seeing signs that the “cycle will be less severe in the future, but whether this is a revolutionary change or a slower evolutionary change remains to be seen.”

According to an electronic poll of the nearly 200-strong audience, S&P said: “65 percent believed it would be an evolutionary change and 7 percent believed it would be a revolution. A further 27 percent of the audience, however, believed that the power of the cycle would remain and the industry would not change.”

The keynote speaker at the conference, Paul Sharma, Head of the Risk Review Department at the U.K. Financial Services Authority and Chairman of the Committee of European Insurance and Occupational Pensions Supervisors’ Pillar I Expert Group, focused on the impact that new regulations would have on business success in the future.

In his view the impending Solvency II measures, which are scheduled to take effect in 2010, might give a competitive advantage for those who adopted them successfully and early enough. “It would be a mistake to believe that because Solvency II implementation is still some years away, that there is plenty of time to carry out changes,” he stated. “We are already seeing the regulatory environment in several countries move toward Solvency II-style measures, and those companies that are able to use internal models will have a key competitive advantage in this new environment.”

The second annual European Insurance Symposium was held in Brussels on June 20. The aim of the event was to bring together all parties in the European insurance market to facilitate debate and discussion around crucial topics within the sector. Leaders from the analytical and business divisions within Standard & Poor’s joined 20 distinguished speakers to discuss and comment on the issues.

Topics Legislation Europe

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