View this article online: https://www.insurancejournal.com/news/international/2010/03/22/108333.htm
The Solvency II reforms, as currently proposed, “would reduce the amount of insurance capacity available to UK businesses and put up the cost of cover,” according to the UK’s AIRMIC (the Association of Insurance and Risk Managers). “As a result companies would have less money to invest in their businesses and would buy less insurance, leaving them more exposed to big losses.”
AIRMIC pointed out that it had supported the original principles of Solvency II, but the organization said the reforms “had strayed from its original mission and was imposing burdens out of all proportion to the problems it was addressing.”
The announcement supports the position taken by the Federation of European Risk Management Associations (FERMA) last week to oppose the increased capital proposals in Solvency II by the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) [See IJ web site – https://www.insurancejournal.com/news/international/2010/03/15/108129.htm ].
John Hurrell, AIRMIC.’s chief executive, warned: “The sharp increase in capital requirements for insurance companies under Solvency II means that there will be less choice of insurance, less flexibility and greater cost. Insurance companies do not pose systemic risk to the economy and, unlike many banks, they have not been found wanting in the recent financial crisis.
“Our members are concerned that they’re going to take a lot of pain for very little gain when buying insurance for their organizations. There’s a feeling that the EU is addressing a problem that doesn’t exist.”
Hurrell cited a recent report by CEIOPS, which tested the resilience of the insurance sector under several scenarios. The results of the exercise indicated that the large European insurance groups would remain resilient as currently capitalized even in the most severe scenarios [See IJ web site – https://www.insurancejournal.com/news/international/2010/03/17/108209.htm].
Hurrell also drew attention to the effects of Solvency II on captives, noting that these self-insurance vehicles “are a valuable tool that help to improve risk management and reduce the cost of insurance, but Solvency II would make them more expensive to run and far more bureaucratic.”
He urged the “EU to return to basics and the original intentions of Solvency II, which was to ensure that insurers are well run, transparent and sufficiently well capitalized for the risks that they carry.”
AIRMIC’s bulletin also noted that it had supported a recent call for a “review of Solvency II from the CEA (Confederation of European Insurers), which warned that the current Solvency II proposals would have harmful economic consequences.”
AIRMIC was a founding member of FERMA and represents more than 900 UK risk managers and insurance buyers, comprising over 75 percent of FTSE 100 companies. The bulletin noted that they spend more than £5 billion ($7.49 billion) annually on insurance.
Source: AIRMIC – www.airmic.com