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“A sharp rise in the cost of accessing capital has been driven by escalating scarcity and a greater focus on risk. Underperforming areas of business should be fixed or removed, allowing the additional capital to be more effectively utilised to exploit strengths and deliver better results”, said Michael Murphy, continental Europe director of Towers Watson’s Risk Consulting and Software business.
As a result of the advent of Solvency II, about 56 per cent of companies are already planning to invest in a wider, more diverse range of assets in order to take full advantage of the reduced regulatory investment constraints offered by the new rules.
Effective January 2013, Solvency II will tighten requirements around how much capital insurance companies will need to maintain, impose tough new rules governing how they identify and monitor risk, and set strict disclosure guidelines to increase transparency.
Any life, property and casualty, or private health insurer that is headquartered in Europe, has subsidiaries that operate there or competes in non-EU markets where European insurers are a significant presence, will need to conform to its provisions or adapt to them. Insurers that are not directly touched by Solvency II may be able to seize competitive advantages from rivals subject to the new rules, according to a Bain Brief.
“Opportunities in this environment exist for the well-capitalised and Solvency II-savvy insurer. Some troubled bancassurance groups under pressure from Basel III are now spinning off their insurance subsidiaries. This will create opportunities for the cash rich insurers and those insurers proficient at exploiting excess capital to thrive under Solvency II”, said Standard & Poor's Senior Director, Laura Santori, at the Towers Watson European Life Actuarial Directors Forum in Rome.