Changing Regulatory Landscape, Capital Requirements Will Impact (Re)Insurers’ Balance Sheets, Guy Carpenter Reports
In Regulation: A World View, Guy Carpenter discusses how the new and upcoming regulations are having a profound impact on companies’ balance sheets and risk management practices. Although primarily aimed at larger, global (re)insurers, the changes will impact medium and small (re)insurers as well.
(Re)insurers are facing new costs and pressures in their efforts to manage the regulatory landscape. The most significant changes are occurring on the international front, where new solvency frameworks are evolving at the global level. From the implementation of the Own Risk and Solvency Assessment (ORSA) in the United States, to the European Union’s Solvency II requirements to the latest developments with China’s new C-ROSS framework, this report provides an analysis of these and other regulatory initiatives.
“The costs associated with compliance and disclosure will continue to rise as insurance regulators and rating agencies increase their scrutiny of the industry,” said James Wrynn, Vice-Chairman of Guy Carpenter Strategic Advisory (US) and a managing director. “In addition to the increased administrative cost of compliance, higher risk-based capital requirements often reduce the strategic flexibility of insurance company operations and ultimately lower returns.”
In Europe, “(Re)insurers are facing the new insurance regulatory regime, Solvency II, which will commence in January 2016,” said Frank Achtert, a managing director and Head of Capital Optimization (EMEA) for Guy Carpenter Strategic Advisory EMEA. “The rules will be compulsory for all insurance and reinsurance companies and groups in the European Economic Area.”
Regulation: A World View also charts and summarizes recent and upcoming regulatory changes in the Asia-Pacific region, including China, Indonesia, India, Malaysia and the Philippines. “Given the broad spectrum of economic and regulatory sophistication across the region, the approach to insurance regulation has varied on a country-by-country basis as each regime adapts solvency principles to its own needs and political realities,” said Mark Shumway, a managing director and Co-Head of Guy Carpenter Strategic Advisory (Asia Pacific).
The report also provides a review of rating agency developments in the United States, Europe and Asia Pacific.
The regulatory issues facing (re)insurers often require highly specialized expertise that may not be readily accessible to clients. Through its broad range of consulting services, Guy Carpenter Strategic Advisory℠ and its Rating Agency Advisory team address the complex regulatory and rating challenges which are facing insurers and reinsurers today.