Inside
CAUTIOUS WELCOME FOR QIS5 RESULTS Following its publication earlier this year, the
results of the fifth quantitative impact study (QIS5) have been met with a mixed reaction.
A report by PricewaterhouseCoopers found
that the results of QIS5, while presenting the European insurance industry as strong under the Solvency II regime, also demonstrated that insurers still faced a number of hurdles in preparing for Solvency II.
“QIS5 demonstrates there are still a number
of areas where insurers face implementation challenges,” says Philippe Guijarro, partner at PwC.
“Low use of internal models in QIS5 suggests
that insurance groups may not be as prepared as they could be. The high submission rate from UK insurers could mean they are ahead of the curve. PwC expects insurers to make a number of strategic and capital changes in light of the QIS5 results.”
Intelligence Christopher Critchlow, chief executive of
OAC Actuaries and Consultants, agrees. “The QIS5 exercise appears to have been a success in that the quantitative aspects of Solvency II and associated implications for insurers seem to have hit home.
“However, as well as showing the likely balance
sheet impacts, QIS5 has highlighted some very important practical considerations, specifically around the modelling of projected assets, liabilities and associated capital requirements.”
While in general the results have been
welcomed, some in the industry believe that they raise further questions.
According to David Prowse, senior director at
Fitch Ratings, catastrophe risk charges remain any issue. “The feeling in the industry seems to be that the existing risk charges in QIS5 are too harsh and give rise to cash requirements which are too strong. This seems to be the main comment which is widely accepted across the industry,” he says.
“ QIS5 demonstrates there are still a number of areas where insurers face implementation challenges.”
LATIN AMERICAN REGULATIONS REMAIN CAUSE FOR CONCERN New reinsurance regulations in both Brazil
and Argentina continue to be a worry for many in the international reinsurance industry.
Although the Brazilian authorities have
effectively repealed one of two new resolutions due to come into effect this year, there is still concern over how the new rules will affect the industry as a whole in the country.
The rule Brazil has changed concerns intra- company cessions. Instead of introducing a complete prohibition on this, insurers will be allowed to transfer up to 20 percent of each reinsurance treaty to companies that are based overseas and are linked with or belong to the same financial conglomerate.
But a resolution that came into force on
March 31, which requires the placement of 40 percent of reinsurance business with local reinsurers, remains in force. The Federation of European Risk Management Associations has warned that this ruling could have a number of adverse effects.
8 | INTELLIGENT INSURER | Summer 2011
These include increased costs, a reduction of capacity in the insurance and reinsurance market, and a concentration of risk within the country.
Similarly, a new regulation in Argentina,
which requires Argentinean insurers to use Argentinean reinsurers or Argentinean subsidiaries or branches of foreign companies
with local capital of approximately $5 million, has caused similar concern.
The International Cooperative and Mutual
Insurance Federation has stated its opposition to the new resolution, which it says has the potential to reduce competition, which in turn could lead to an increase in pricing.
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