|
|
Insurance companies on both sides of the Atlantic are being scrutinised based on capital adequacy.
In Europe the EU's so-called Solvency II rules aim to align better the sector's capital safety cushion with the risks on their books and had been intended to act as a benchmark for other countries' rules.
In the United States the National Association of Insurance Commissioners (NAIC) is forging ahead with its 2008 Solvency Modernisation Initiative (SMI), which looks at international developments in insurance solvency and their potential use at home.
But the report, published by the University of Leeds in partnership with the University of Edinburgh and funded by the UK Social and Economic Research Council, challenged the "appropriateness of regulatory initiatives, such as the NAIC's SMI and Solvency II". The report's findings come ahead of key decisions on Solvency II, which has been 10 years in the making and had been due to come into force in 2012, but whose implementation has been subject to a series of embarrassing delays as EU lawmakers and officials clashed on final drafts of the regulations.
The findings chime with complaints from the insurance industry about the Solvency II rules, which companies say will make their regulatory capital requirements more volatile and hurt their business.
The report evaluated the impact of 19 so-called "mega catastrophes", which caused $25 million or more in insured losses on US property and casualty insurers, and found that although such natural disasters have negative implications, insurers were in a position to absorb such losses and that mega catastrophes did not threaten their solvency. In fact, mega-catastrophes can improve market conditions for insurers, the report said.