Ahead of the formal proposal for the Solvency II directive, insurers are gearing up for an interactive debate with the Commission.
Commission and insurance industry representatives are set to meet at a conference, “Solvency II & risk management for European insurance firms”, on 10 November 2006 to discuss the new project.
The Commission seeks to complete its financial services action plan (FSAP) with a proposal to establish capital rules for insurance firms, as the capital requirements directive did for banking. The Solvency I directive has set out the “solvency margin” requiring insurers to hold extra capital; this extra source of capital should help to meet unexpected events and protect the policyholders of an insurance undertaking. The Solvency II directive is intended better to match solvency requirements to the risks insurances face and encourage them to improve their measurement and monitoring of risks.
Insurers now fear that the new directive could force them to increase the amount of extra capital held. Gérard de la Marinière, president of the insurer association CEA, said: “If the insurance industry is to make an optimum contribution to economic growth and employment, policymakers need to be sure that their actions support enlargement of the scope of insurance, improvement in efficiency and increased competitiveness of the industry.”
The UK Treasury also voiced concerns about Solvency II, believing that the new directive could result in consumers paying higher prices for insurances as a result of the extra capital required.
The Solvency II framework directive is expected to be adopted by mid-2007.