Guy Carpenter & Company has released a special report, Succeeding under Solvency II - Pillar One: Capital Requirements. The paper is the first in a series of Guy Carpenter reports analyzing Solvency II and its attendant issues as they are finalized over the next several months.
This first report focuses on Pillar I, which addresses the quantification of capital requirements for re/insurers seeking to serve the European marketplace. The paper examines:
- the process of transitioning to Solvency II;
- the impact on re/insurers, including niche players, small- to mid-size providers and large global re/insurance companies;
- the costs for implementation, model approval and ongoing compliance, as well as maintaining required levels of capital;
- key challenges and opportunities that are emerging under the new regulatory regime; and
- capital management strategies that can be used to reduce risk levels associated with Solvency II.
Claude Lefebvre, Head of GC Analytics - EMEA Region, stated “Despite its nominally European focus, Solvency II presents a wide range of considerations - and opportunities - for insurance entities worldwide. All businesses with operations, subsidiaries or affiliates in Europe, writing coverage in Europe or doing business with insurers in Europe should be preparing now for these fundamental changes in the way that the European market will examine risk and risk management practices.”
David Flandro, Global Head of Business Intelligence, added, “Solvency II’s impact is expected to be significant for most insurance organizations, and a potential challenge for others. With a disciplined, thoughtful approach to risk-related capital management, companies can take significant steps towards lessening this impact and even improving their competitive positioning as a result.”