- Solvency II programme, with current deadline, has become too ambitious
- Industry frustrations over uncertainty and moving timetables must be addressed
- Greater guidance needed from EIOPA to drive a more harmonised and collaborative approach
As the insurance industry grows increasingly frustrated with ongoing Solvency II delays and uncertainty, KPMG outlines a series of measures that should be adopted to move the regulatory framework forward.
KPMG believes the initiatives outlined below, in conjunction with robust oversight from EIOPA, could help steer the regulatory framework back on track and make it more relevant and robust.
Roger Jackson, insurance partner at KPMG, commented: “There is a lot of work that needs to be done to turn the current situation of confusion and frustration around. First of all, the industry would welcome greater impetus from EIOPA to steer stronger engagement and dialogue between European regulators.
“In addition, there are also some more specific, technical suggestions which may help re-energise this regulatory framework. In particular, on a pan-European basis Pillar 2 could be de-coupled from Pillar 1 and adopted early to continue the drive towards a more harmonised approach across Europe. Pillar 1 should then be left to run its course. The UK FSA proposals on enhanced Individual Capital Assessments (ICA+) should be supported.”
Shifting the emphasis from Pillar 1 to Pillar 2
“The time has come to shift the emphasis from Pillar 1 to Pillar 2. An early adoption of Pillar 2 would enable businesses to capitalise on the work they’ve done to date and ingrain more effective governance and risk management procedures.
“We are already witnessing regulators beginning to forge ahead with aspects of the Pillar 2 regime. However it is imperative there is a consistent approach across all countries to ensure a level playing field. This requires stronger oversight from EIOPA, including in relation to the college process, to drive a more harmonised approach to implementation and seek to force more effective collaboration between regulators. ”
Allowing Pillar 1 to run its course
“The industry, understandably, feels aggrieved that regulators keep changing their expectations with regards to Pillar 1. Firms have invested heavily in Pillar 1 and have in many cases been encouraged down the internal model route by regulators. These businesses may now believe they have wasted time and money getting to this stage. What we really need is to find a pragmatic outcome that can be achieved without further costs being incurred and work having to be unwound.”
Supporting FSA proposals on ICA+
“While the replacement of current ICA requirements with ICA+ is a positive step forward, the industry needs guidance on how this will actually work in practice. The FSA needs to ensure that the UK is not disadvantaged and that the approach is in line with other frameworks promoted across Europe.”
Phil Smart, UK head of Solvency II at KPMG, concluded: “The Solvency II regime seems to have lost its course of late, with some analysts now predicting it may never actually get off the ground. It is time for key industry players and regulators to admit that the framework may have been too ambitious and work together to turn the ship around. Some solid foundations have been laid and we must ensure these efforts do not go to waste.”
ENDS
Notes to editor
For further information please contact
Gavin Houlgate, Director of Communications
Tel: +44 (0)20 7694 3902
Mobile: +44 (0)7795 290 855
Email: gavin.houlgate@kpmg.co.uk
KPMG Press Office: 020 7694 8773
About KPMG
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with nearly 11,000 partners and staff. The UK firm recorded a turnover of £1.6 billion in the year ended September 2010. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 150 countries and have more than 138,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.
