By Steffen Müller
The insurance industry fears high cost and distraction from the day-to-day business through the implementation of the European Commission’s Solvency II directive, a Grand Thornton UK survey found.
The Solvency II Directive 2009/138/EC aims to codify and harmonise insurance regulation in the European Union (EU), primarily concerning the amount of capital that EU insurance companies must hold to reduce the risk of insolvency.
According to Grant Thornton UK’s survey, more than three quarter of the respondents consider the costs of Solvency II to be disproportionate and to be using up valuable resources that could be far better utilised in other areas.
Only 6% of the interviewees believe the costs of Solvency II are ‘reasonable’.
However, acceptance towards Solvency II as a way to run business is growing, from one in four in a survey conducted in 2012 to one in three in the recent report:
"Increasingly, the sector is begrudgingly accepting Solvency II as a ‘necessary evil’, and recognising that it will bring some benefits", Grant Thornton UK head of actuarial and risk Simon Sheaf said.
Accordingly, the vast majority (94%) of respondents agreed with the principles of Solvency II, but 74% still believe that the principles have been ruined by the implementation.
"The industry has largely been in favour of the principles behind Solvency II for some time. However, the opacity around implementation deadlines and precise requirements are continuing to make the pill-swallowing an even more bitter exercise," Sheaf said.
"The sector still feels as though it’s being unnecessarily burdened by the complexities of Solvency II," he added.
The Solvency II directive is scheduled to be effective on 1 January 2016. With 76%, more than three quarters of the survey’s respondents expecting the implementation date to happen as scheduled and almost all (98%) suggesting their organisation would be prepared for the implementation at this date.