With a lot hanging over the head of the insurance industry – what with Brexit uncertainty and a host of other changes – guidance on matters such as Solvency II could be seen as a welcome development.
Certainly, Willis Towers Watson thinks so, citing the risk being faced by the sector of being marginalised by investors amid a more complicated and less transparent performance reporting due to Solvency II.
With the Prudential Regulation Authority (PRA) releasing ‘much-needed’ Solvency II guidance, the brokerage giant believes it will now be significantly easier for investors to understand how individual insurers are performing.
The Solvency II capital ratio roll forward template was published by PRA executive director of insurance supervision David Rule (pictured), who spoke at this week’s Bank of America Merrill Lynch 23rd Annual Financials CEO Conference in London.
“The Bank of England supports the development of international regulatory standards, such as the ICS (international capital standard),” said Rule in his speech. “As both a home supervisor of UK insurance groups with businesses around the world and a host supervisor of branches and subsidiaries of insurance groups from many different countries, I also welcome the monitoring period approach.
“It will give regulatory colleges a common language for measuring group risk and defining capital. No capital framework is perfect and ICS will be no different. But having agreement on common metrics will be a big step forward.”
Last year a whitepaper, co-authored by Autonomous Research managing partner Andrew Crean and Willis Towers Watson senior director Kamran Foroughi, highlighted the lack of information provided to the market by insurers on their movement in Solvency II capital positions over time.
“This is a timely publication by the Bank of England,” commented Foroughi. “In preparation for year-end 2018 Solvency II reporting, insurers can now present to the market a clear explanation of the movement in Solvency II capital ratio.
“We hope that insurers both in the UK and across the European Union seize this opportunity to improve engagement with investors.”
