Solvency II is big news in the world of insurance. From business liability insurance, to professional indemnity insurance to demolition insurance policies – the Solvency II review will eventually create a complete new set of strong requirements regarding capital adequacy and risk management in the world of insurance. The end goal? To design one comprehensive system for insurance across the EU. The point? To provide a strengthened system which will cut down on the likelihood of consumer losses, bolster protection for those with policies and lower the chance of market disruption in the insurance world.
So what effect will Solvency II have on insurers and on their clients? And why isn’t everyone happy about the introduction of Solvency II?
Solvency I was implemented way back in the early 70s as a way to ‘harmonise’ insurance across the continent. Unlike the up-coming Solvency II, Solvency I allowed for rather a lot of disparity in terms of insurance regulations – over the last 40 years or so, this has allowed for EU members to develop very different insurance regimes. In contrast to Solvency I, Solvency II will include regulations for risk management within insurance companies. It is hoped that the new review will achieve the following:
• Consistency across EU insurance
• Balance sheets which are consistent with the rest of the market
• Own risk and solvency assessments (ORSA)
• Increased accountability for senior managerial figures
• Supervisory assessments
What are the downsides?
It isn’t just Eurosceptics who have reservations about Solvency II. The FSA (Financial Services Authority) director for insurance, Julian Adams, discussed many widespread concerns about the shift in a speech made as part of this month’s Nicholas Barbon Lectures. His speech, entitled “The impact of changing regulations on the insurance industry” spoke of a number of concerns regarding Solvency II which included:
• The practicalities of creating a consistent EU insurance regime in very different countries
• The financially distorting effects of calculating capital requirements in a pan-EU system
What does this mean for insurance customers?
For insurance customers, the answer to this question is: Nothing yet. However, once these new regulations really start to kick in January 2013 the idea is that you will feel a lot more secure in your policies. You are likely to feel a lot more confident and comfortable with your insurance as your policy will be part of a much more robust system. You may also experience a lowering of insurance premiums in the household and motor insurance arenas as competition between insurers hots up. There’s also likely to be more in the way of product innovation which will mean there are more insurance products out there, giving you more choice and more flexibility.
Until these changes are implemented and start to take effect, choosing a transparent, flexible insurer who can provide you with tailor-made policies is your route to dependable and comprehensive insurance – all at a great price. Explore the rest of our website to find brilliant business liability insurance, professional indemnity insurance, courier insurance and everything in between!