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Date: 04/11/04
- The European Commission is moving slowly towards new solvency regulations for the European Union insurance industry - the much vaunted Solvency II project;
- it is hoped that this will help stabilize an industry hit by a wave of difficulties. Problems of mismatched risks and liabilities have been compounded by declining global equity markets and the dot.com crash;
- Solvency II is likely to be structured around three pillars loosely modelled on the Basle II capital adequacy regulations put in place for banks. This will:
- require closer supervision to ensure more precise monitoring of risk;
- give companies the chance to tailor their in-house risk assessment systems, and;
- increase disclosure requirements on firms.
- a framework directive is scheduled for publication next year;
- a completion date of 2007 for the regulations is considered optimistic in some quarters, with concerns that more extensive restructuring of the life insurance sector will be necessary.
With Solvency II the European Commission planned to propose regulations, which aim to establish a more sophisticated solvency regime for insurance companies to replace the simplistic, ratio-based structures now widely used across the EU.
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