LONDON, Tuesday 25 April, 2017 — The insurance sector is at risk of being further marginalised by investors as performance reporting becomes more complicated as a result of Solvency II, according to a report published jointly by Autonomous Research and Willis Towers Watson. Based on the analysis of the reporting statements of 31 European insurers, the report finds Solvency II has forced apart the sector’s accounting and solvency reporting, making it harder for investors to have a clear picture of how individual insurers are performing.
The report finds that Solvency II falls significantly short as a profit performance and cash generation metric that can replace embedded value (EV). The urgency of this issue is further underlined by the rapidly shrinking publication of useful EV data in Europe and the fact that the reformation of IFRS (new proposals expected to be published in May) is unlikely to help for many years. Continue reading Complex reporting caused by Solvency II risks putting investors off insurance sector
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 the 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