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The CEA Impact Assessment Survey found that all types of insurance and reinsurance undertakings, be they pan-European companies, monoliners, mutuals or SMEs, expressed a strong commitment to a risk-based economic framework for insurance supervision. However, regulatory harmonisation across European borders is needed to guarantee that consumer confidence will not depend on any insurers’ legal form, size or location. This harmonisation should go hand in hand with the consistency of supervisory actions across companies, jurisdictions as well as over time.
Additional analysis by CEA on the consequences of Solvency II for Insurers’ administrative costs made clear that these would be manageable if the future Solvency II framework indeed follows a true risk-based economic approach.
Aligning business economics and best practices in the insurance industry with the future prudential supervisory framework would reduce the estimated initial compliance costs of Solvency II to a total of Ԃ.0-3.0bn. The ongoing annual administrative costs is estimated around Ԁ.3–0.5bn per year.
In a worst case scenario, where the Solvency II framework does not follow a risk-based economic approach, the initial and annual cost of compliance for companies would at least double. However, the true costs of an inappropriate Solvency II framework cannot be expressed in monetary terms, because there will be no incentive for companies to manage risks and would even include inverse incentives for companies.