Consultants suggest that the number of corrections EIOPA has released and the difficulties firms are having interpreting some of the specifications means the assessment is taking some firms more time than they first thought. Some insurers are understood to have anticipated completing the exercise in a matter of days but have subsequently spent weeks completing the assessment.
Charles Garnsworthy, insurance partner at PwC in London, says: "In general, the process is more onerous and is taking longer than people might have thought, [as] it is covering some very sensitive, challenging issues. There is the element of the clarification of the rules, which means people have to revisit what they thought the calculations originally meant." "There's also something with insurers about making sure they really understand what the answers are telling them", he says.
Since the LTGA was launched on January 28, the European Insurance and Occupational Pensions Authority (EIOPA) released four errata to the technical specifications. It has also published a list of 217 questions asked by European insurers – comparable to the 220 published during the fifth quantitative imapact study (QIS 5). These range from queries specifically about the long-term guarantees package, such as on the application of the matching adjustment and discount rate methodology to questions on long-established elements of Solvency II, like contract boundaries.
The combination of widespread uncertainty over the technical specifications and time constraints may also reduce the value of the LTGA results to policy-makers. William Coatesworth, consulting actuary at Milliman in London, says: "It appears likely that challenges in interpretation will effectively mean that the quantitative results will be on a best-efforts basis for many firms participating in the assessment". "While such results may be sufficient to illustrate the effectiveness (or otherwise) of the long-term guarantee measures tested under the assessment, they are unlikely to provide an accurate insight into how companies' balance sheets will look under Solvency II", Coatesworth adds.
However, some believe the problems go beyond interpretation of the specifications and that more fundamental issues need to be addressed. A spokeswoman for the German insurance trade association, GDV, says: "Solvency II is not yet ready to be implemented. The risk-free yield curve still reveals lots of problems that would make it near impossible for life insurers to keep offering long-term guarantees. Implementing a yield curve that fits all kinds of market situations therefore is a top priority."
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