All posts by Solvency 2 News

British regulator to focus more on protecting insurance policyholders

LONDON, March 20 (Reuters) – The Bank of England said it
will devote greater effort to ensuring more consistent
protection for those who would suffer most if their insurance
policies do not pay out as promised. The move follows a review by the central bank’s Independent Evaluation Office (IEO), published on Monday, which looked into
how the BoE’s supervisory arm, the Prudential Regulation Authority (PRA), ensures that policyholders are properly protected. PRA work on the issue had been “crowded out” by “live supervisory issues” and the need to implement European Union capital rules known as Solvency II by January 2016, the IEO said in its report. The PRA’s “articulation of its policyholder protection responsibilities appears to be unfinished business”, although there was no evidence that PRA supervisors were falling short of their duties, the IEO said.

BoE Deputy Governor and PRA Chief Executive, Sam Woods, said the PRA does not seek to protect all policyholders equally and will direct more resources to those who would suffer greater financial hardship if their policies do not pay out as promised.

Continue Reading “British regulator to focus more on protecting insurance policyholders” at Nasdaq News

NAIC asks Treasury secretary to review EU-US covered agreement

The National Association of Insurance Commissioners has asked the new Treasury secretary to clarify provisions of the covered agreement reached between the United States and the European Union in response to the bloc’s Solvency II directive. 

The covered agreement deal negotiated by the U.S. Department of the Treasury under the Obama administration and the Office of the U.S. Trade Representative, announced on Jan. 13, aims to address the fact that the European Commission has not deemed the United States an equivalent jurisdiction, per the EU’s Solvency II directive outlining a risk-based capital regime for insurers and reinsurers in Europe.

Continue Reading “NAIC asks Treasury secretary to review EU-US covered agreement” at Business Insurance News

Flawed Solvency II risk margin is hurting consumers

Analysis by Willis Towers Watson finds the current formula is causing higher premium rates, reduced competition and poor value for consumers

LONDON, Thursday 16 March, 2017 — Willis Towers Watson has responded to a European Insurance and Occupational Pensions Authority (EIOPA) Discussion Paper on the upcoming review of Solvency II, where it has identified significant flaws in Willis-Towers-Watsonthe formula used to calculate the risk margin and recommended a fundamental review of its methodology and calibration.
Kamran Foroughi, Director at Willis Towers Watson, said: “We believe the high level of risk margin currently attached to long-term insurance products is resulting in higher premium rates and reduced competition, leading to worse value for consumers.”
Willis Towers Watson’s submission notes that the risk margin has become a much more material component of insurers’ balance sheets, leading to a number of challenges and changes in business practice, including:
• Asset Liability Matching. Insurers’ ALM challenges related to risk margin have been exacerbated by falling interest rates.
• Risk transfer. The bigger the risk margin relative to the rest of the technical provisions, the more insurers are incentivised to offload risk to reduce the risk margin.
This can be done via reinsurance to a company outside the EU which is not bound by Solvency II rules. Continue reading Flawed Solvency II risk margin is hurting consumers

L&G: UK providers would be ‘world leaders’ without regulatory costs

Providers in the UK would be ‘world leaders’ in digital distribution if they had not spent so much on meeting regulatory requirements, according to Legal & General chief executive Nigel Wilson.legal.general.logo_.2014

Speaking during a panel debate at the Marketforce Distribution Innovation in Pensions and Investments conference, Wilson (pictured) said the cost of regulation has stopped providers from investing in advice.

‘The retail distribution review (RDR) was a good thing but has cost a fortune to implement…and created an advice gap in the UK which we have to now see as an opportunity,’ he said.

Continue Reading “L&G: UK providers would be ‘world leaders’ without regulatory costs” at New Model Adviser

Mutual LV= weighs merger or disposals as capital rules bite

One of Britain’s largest financial services mutuals has been involved in a secret hunt for a merger partner as a combination of tougher capital requirements and low interest rates hamper its profitability.

dddvtureSky News has learnt that LV=, which has nearly 6m UK customers across insurance, pensions and income protection products, has held aborted talks in recent months with Royal London, its fellow mutual, about a possible tie-up.

Those talks are said to have broken down amid a disagreement over the structure of a deal.

Continue Reading “Mutual LV= weighs merger or disposals as capital rules bite” at Sky News

Solvency II means no need for new EU insurance framework

This announcement is in response to a European Insurance and Occupational Pensions Authority (EIOPA) consultation on the potential harmonisation of frameworks for insurers.that_s_all_folks__by_surrimugge-d6rfav1

The lobby group said in its position paper that Solvency II already allows early intervention when either the Minimum Capital Requirement (MCR), or the Solvency Capital Requirement (SCR) are breached, and that this is sufficient.

It states: “Insurance Europe believes it is important to reiterate that Solvency II already provides several safeguards that…

Continue Reading “Solvency II means no need for new EU insurance framework” at The Actuary

Solvency II complicates captive strategies

The implementation of Solvency II in Europe has provided an additional risk management tool to owners of European captives, but at a cost, forcing risk managers to re-examine whether they are getting the best use out of their captives.confused-face-484x295

Solvency II, the European Union-wide risk-based capital rules for insurers and reinsurers, came into force in January 2016, and with it came new elements that have affected captives, for better or for worse.

“What we’re seeing as managers is an increased interest in strategic reviews and companies re-examining the captives to explore optimization opportunities and thus potentially…

Continue Reading “Solvency II complicates captive strategies ” at Business Insurance News

Buyouts more affordable but only for a handful of schemes

Buyouts have become more feasible as annuity pricing for non-pensioners has improved, but some experts say many schemes still have a long way to go before being able to afford a buyout or buy-in transaction.GettyImages-99978274.0

Research conducted by consultancy LCP shows that around 1m people had their defined benefit pension insured through a buy-in or buyout, as insurers started to find their feet following the introduction of Solvency II.

More recently, the Cancer Research UK Pension Scheme completed a £250m pensioner buy-in with Canada Life as part of the scheme’s plan to reduce risk, including an introduction last year to liability-driven investing.

Continue Reading “Buyouts more affordable but only for a handful of schemes” at Pensions Expert News

Deal or no deal? US divided on EU insurance agreement

On the face of it, the insurance covered agreement announced on January 13 should be everything Donald Trump detests. Signed in the final days of Barack Obama’s administration, when Trump had already been elected, the deal is between the US and the European Union – an institution the new president has repeatedly disparaged.1343

It will pre-empt the authority of individual US state legislators and require them to defer to EU regulation of European insurers in US markets.

On top of that, the agreement was negotiated by the Federal Insurance Office (FIO), an Obama-era creation Republican lawmakers are keen to abolish.

Continue Reading “Deal or no deal? US divided on EU insurance agreement” at Risk.net

PRA says insurers exaggerating Solvency II problems – report

Prudential Regulation Authority (PRA) chief executive Sam Woods has reportedly told parliament that insurance companies are overstating the issues regarding Solvency II.4088135-blow-me-funny-quotes

Woods said on Wednesday before the parliament’s Treasury Select Committee that Solvency II is “basically a sensible regime,” Reuters reported.

However, he admitted that Solvency II, which sets out capital rules for EU insurers, needs some changes.

Continue Reading “PRA says insurers exaggerating Solvency II problems – report” at Insurance Business News