GCC states that the Solvency II regime has several key benefits and drawbacks for reinsurance cedents.
Some benefits include:
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greater transparency and convergence in reporting among Solvency II and equivalent regimes;
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improved reinsurance security, overall;
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a stronger and deeper insurance-linked securities (ILS) market.
Some drawbacks are:
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capital requirements and compliance costs are discriminately higher for smaller reinsurers, may force some consolidation;
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more intense, volatile underwriting cycles.
GCC warns that Solvency II will profoundly impact the reinsurance market - not only within Europe but globally, and advises that all companies affected by these sweeping changes prepare now to navigate this changing and increasingly volatile reinsurance market.
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