September 26, 2006 by Canadian Underwriter
The International Underwriting Association (IUA) has launched a new Web site to discuss Solvency II, the planned new European solvency regime for insurers to be established in 2010.
The new Web site outlines the background to Solvency II, including a summary of previous European Union (E.U.) directives governing insurer solvency rules since the 1970s. It also highlights the main changes and key elements involved in the new regime.
The link to the Web site is: www.solvencyii.co.uk. It provides access to information and issues arising for non-life insurers from the E.U.’s introduction of new solvency rules.
According to the IUA, “Solvency II is a risk-based economic framework that gives insurers an incentive to measure and monitor their risks and have their capital requirements based on this risk assessment. Such a regulatory approach is already being favored by the Financial Services Authority in its Individual Capital Adequacy (ICA) requirements for insurers.”
The IUA, together with Lloyd’s, the Association of British Insurers and the Lloyd’s Market Association has recently issued a draft industry guide on this ICA process. A copy of this draft guide is available for consultation and may be downloaded from the Solvency II website (www.solvencyii.co.uk).
“A great deal of attention is being focused by insurers and reinsurers on the development of a new EU solvency regime and the IUA’s new Web site reflects this interest,” Pam Byrnes, the IUA’s director of financial and compliance services, said. “The introduction of new solvency rules represents a real chance for the industry to help shape a much more effective regulatory system that allows more efficient use of capital and better risk management.
“But in order to make sure we get the best system possible the industry needs to be fully involved throughout the development process.”
Moore Stephens LLP is an independent member firm of Moore Stephens International Limited, an accounting and consulting network. It warns that companies engaged in the insurance industry “cannot afford to be complacent” about achieving Solvency 2 compliance.
“Solvency 2 represents a radical change to the way in which the insurance industry is regulated in Europe,” Moore Stephens said in a press release. “It is a fundamental review designed to establish a revised set of EU-wide capital adequacy requirements for the insurance industry and to protect the interests of policyholders more effectively
“Solvency 2 will demand more sophisticated and analytical thinking on capital, risk and internal controls. It will also demand more robust transparency, particularly with regard to the unbiased reporting of insurance liabilities and assets. In particular, firms may need to strengthen their modeling abilities and the documentation of financial models that will underpin a Solvency 2 approach.”