FSA: key risks facing insurance sector
23 March 2010
At the Insurance Sector Conference 2010, FSA Director Ken Hogg said that there are major unresolved issues on Solvency II. In the UK on the life side, for instance, the debate was on the illiquidity premium as a way of valuing life company annuities, particularly annuity liabilities.
FSA Director Ken Hogg said at the FSA Insurance Sector conference 2010 that there are major unresolved issues on Solvency II. In the UK, on the life side, the first debate was on the illiquidity premium as a way of valuing life company annuities, particularly annuity liabilities.
But of course, as important as all these prudential risks are, the single biggest prudential challenge for all firms in the insurance sector is Solvency II. Solvency II will radically alter the capital adequacy regime for the European insurance industry.
The Individual Capital Adequacy Standards regime in the UK is a strong foundation on which to make the transition to Solvency II, but the new directive goes much further. The requirements for delivering and demonstrating the standards of risk management and governance will be challenging, and especially so for groups that operate in multiple countries. Solvency II will require greater disclosure and transparency, together with additional and more frequent reporting.
Although there are some material technical issues that are not yet finalized, firms should not be waiting for these to be resolved. There are bigger risks associated with inadequate engagement.
© FSA - Financial Services Authority
