As the January 1, 2016 deadline for Solvency II approaches, insurers across Europe are struggling to complete compliance programmes that have been held up by delays in one area causing knock-on effects in others and by slow regulatory approval of internal models for capital requirements that has left little time to work with asset managers and servicers that are also part of the compliance process.
Larger countries with the most advanced financial infrastructures are better prepared for Solvency II than their smaller neighbours, and Northern Europe is in a better position to meet the regulatory deadline than Southern Europe. There are country-by-country differences in terms of focus on the three pillars of the regulation, with insurers in Germany, for example, being confident that they have mastered the financial requirements of Pillar 1. In France, insurers have focussed on Pillar 3 requirements covering reporting and disclosure, and including the asset look-through element of the regulation that requires cooperation between insurers and their asset management partners.
Focussing on the look-through process, take up of the tripartite model developed by the Investment Association in the UK, Club Ampere in France and the BVI in Germany in an attempt to ensure common presentation of data that insurers need from asset managers has been chequered across Europe, with some large insurers making bilateral agreements with their asset managers.
Despite Solvency II’s design to ensure that insurers demonstrate and sustain solvency, asset managers have been proactive in tackling the regulation on behalf of their insurance clients and many recognise that the regulation, and the larger regulatory shift to which it belongs, will have an impact on their business models.
These and other findings are the result of a review of European readiness for Solvency II compliance published by Silverfinch, provider of a utility-type service for secure data sharing between insurers and asset managers, and entitled ‘The European Race to the Solvency II Finish Line’. John Dowdall, managing director of Silverfinch, says: “In spite of the deadline for Solvency II, the fact remains that there is much work to do. Across Europe, the majority of asset managers are aware of the benefits of helping their insurance clients with Solvency II, but how to respond to the regulation has clearly split the continent.”
With less than 100 days to go until the compliance deadline, the review concludes with some optimism, stating: “All is not lost, there is still time to achieve a satisfactory, albeit not perfect, introduction to Solvency II, however all of the stakeholders will need to up their game, and communication will be key.”