CEE Renewals: Are U Ready For Solvency II?

Last September, KPMG polled over 80 CEE-based insurance companies on their preparedness to introduction of the Solvency II regime. Results of the findings demonstrated that regional players were not too concerned with the looming changes. Little seems to have changed in time for the January renewals.

47% of those companies that had launched preparation for SII, confesssed they had done so because of the pressure from their owners, mostly large Western players, another 17% had experienced pressure from the supervisory authorities. Only 28% proudly stated that SII preparation steps were their own idea.

Preparations for the SII implementation didn't really increase the companies' staff: just one company out of the polled 88 appointed a fully dedicated SII team. 52% expected their existing staff would be enough to bear the SII preparation burden, and just few percent believed they may need some external resources to that end some time in the future.

Almost half a year later, the situation doesn’t seem to have changed, opinions of our experst indicate. “Solvency II is in its early stages in CEE, and some larger foreign-owned groups are already underway with their preparations, while many local domestic insurers, with a few exceptions, have yet to react to the forthcoming regulatory requirements”, Guy Carpenter stated in its review of the renewal trends. On the bright side, the new regime “has impacted reinsurance buyers' awareness of protecting themselves against catastrophe losses up to a recommended return period and consequently heightened the interest in usage of probabilistic catastrophe models to support PML estimate,” the broker added.

Hannover Re’s Guerassimenko expects that with the introduction of the Solvency II regime, ceding companies will pay greater attention to ratings of their reinsurance partners. If this indeed is the case, domestic-owned reinsurers may find themselves under pressure.

Although, according to KPMG,  as much as 59% of the participants had launched preparations to SII, only 35% took steps to cover all three pillars of the new regime (quantitative requirements, internal and supervisory control, and disclosure standards). Most other conscientious companies concentrated their efforts on the first pillar, which deals with capital adequacy.