European Insurers Anticipate Positive Impacts from Solvency II, Accenture Survey Finds
Half Have Enacted Formal Solvency II Programs
CHICAGO; May 2, 2006 – The majority of European insurers believe that Solvency II will improve their companies’ risk and capital management functions, and half have already enacted formal programs to address the proposed European Union (EU) directive, according to results of a survey released today by Accenture.
Solvency II calls for the harmonization of national solvency regulations for insurers based in Europe and the enactment of new rules regarding the levels of capital that EU insurers must set aside to cover their combined risks and liabilities. The stated goal of the directive is to protect policyholders and shareholders by establishing a common solvency system in Europe that is more closely matched to the true risks assumed by insurers.
According to the Accenture survey, nearly four-fifths (78 percent) of European insurers believe that Solvency II will improve transparency and controls in managing risk and capital, and more than three-fifths (62 percent) anticipate improvements in their organizations’ allocation of regulatory capital, which is the capital reserves that regulators require be set aside with no exposure to market risks.
The survey also revealed that a large number of insurers are moving swiftly in preparation for Solvency II. Although the final text of the directive is not expected until February 2007 and implementation is not likely until 2010, half (49 percent) of the insurers surveyed had already enacted formal programs to plan and mobilize for Solvency II, and another quarter (24 percent) said they were planning to enact such programs.
“The Solvency II directive has clearly captured the focus and attention of the European insurance industry,” said Stephen Christie, senior executive in Accenture’s Insurance practice. “Our research suggests that European insurers may be warming to the directive as they identify potentially significant strategic benefits beyond pure compliance.”
Two-fifths (41 percent) of respondents expect to realize competitive advantages as a result of Solvency II, and nearly one-quarter (24 percent) anticipate receiving improved credit ratings due to the directive, according to the survey.
Additional key findings:
- Most respondents foresee a “moderate” or “significant” impact from Solvency II across most major organizational functions. An overwhelming majority anticipates “moderate” or “significant” impacts on risk (92 percent), capital management (89 percent), finance (89 percent), reserving (84 percent), product pricing (84 percent), corporate governance (84 percent), strategy and planning (79 percent) and asset management (76 percent). Most anticipate “significant” impacts on their risk (57 percent) and capital management (54 percent) organizations, and roughly one-third expect significant impacts on their asset management (35 percent) and finance (30 percent) functions.
- Many insurers believe Solvency II will improve the integration and performance of vital organizational functions. Two-fifths (41 percent) believe it will bring a “significant increase” in the level of integration between their actuarial, operational risk and finance functions. Roughly one-third (30 percent) said they anticipate significant increases in process efficiency between these functions and their business lines.
- Solvency II programs are being sponsored at the highest levels of many organizations. One-third (32 percent) identify members of their executive committee or board of directors as primary Solvency II program sponsors.
“European insurers should expect a positive outcome from the directive, but plan for major changes - and do so soon,” said John Smith, executive and Solvency II lead at Accenture. “Those who have not yet developed or enacted a plan must assess the required efforts and areas of immediate focus quickly in order to allow adequate time for preparation and to understand the hard work ahead for complying with and realizing the benefits of Solvency II.”
Accenture designed a survey to assess the response by European insurance firms to Solvency II. Conducted in October and November 2005 by Kadence UK, the survey covered 37 firms, predominantly life or property and casualty insurers. Roughly one-third reported gross annual premiums of more than €10 billion. Of the firms represented in the survey, 12 are based in the United Kingdom, eight in Germany, six in France, five in Spain, three in Italy and three in Scandinavia.
Accenture is a global management consulting, technology services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses and governments. With deep industry and business process expertise, broad global resources and a proven track record, Accenture can mobilize the right people, skills and technologies to help clients improve their performance. With more than 129,000 people in 48 countries, the company generated net revenues of US$15.55 billion for the fiscal year ended Aug. 31, 2005. Its home page is www.accenture.com.
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