Also according to the survey, only 22 percent of the respondents said they just plan to comply with Solvency II’s standard requirements, suggesting that the remaining 78 percent of insurers surveyed intend to do more than simply comply with the directive.
“As the 2012 deadline approaches and since the recent global economic crisis has put the spotlight on risk management, insurers realize that Solvency II and its impact on the enterprise-wide decision-making process imply a much more significant transformation for their organization, processes and information technology (IT) systems,” said Eva Dewor, executive director of Accenture’s Risk Management service line for Europe. “Insurers have a much better understanding than three years ago of the scope, implications and complexity of implementing and executing all three pillars of Solvency II. This could explain the higher than initially estimated costs.
“The costs could actually be even higher because we anticipate a fierce war for talent, since insurers will face a skills shortage as the deadline approaches and they will all have to implement the directive during this two-year timeframe. There is already a shortage of actuarial experts and risk solution IT architects, and we expect Solvency II project implementation specialists to be in high demand in the coming year,” Ms. Dewor added.
According to the survey, most of the European insurers surveyed (53 percent) think they will definitely meet the 2012 compliance deadline, and less than one-third (29 percent) said that improvements are still needed to meet the deadline. Fourteen percent said they would ensure compliance with only a minimum number of mandatory requirements and implement the remaining tasks after 2012. Four percent warned that they would probably not be in compliance within the required timeframe.
The survey also found that among the many challenges for compliance with Solvency II, the two most significant ones are the implementation of data management capabilities that will ensure the completeness and accuracy of required compliance data (cited by 45 percent of the respondents as a very important issue), and obtaining the required approvals of their internal models for calculating solvency capital requirements (also cited by 45 percent of the respondents). The third biggest issue, mentioned by 38 percent of the insurers, is their ability to integrate their internal models into their overall risk management function.
Another key finding of the survey: 69 percent of insurers said they still have significant work ahead in defining and implementing an integrated risk management IT architecture. Such an IT architecture will enable insurers to have a single consolidated view of the overall risk taken by their organization, considering the significant number of applications currently being used to model the different types of risks.
“While most insurers are confident in their ability to meet the 2012 compliance deadline, there is still a long way to go for them to complete their Solvency II programs as our survey highlights,” said Dewor. “Most insurers are finalizing their roadmap for Solvency II compliance, but the biggest effort is actually in front of them as the major challenge will be to bring these concepts to life. The real question that insurers should address now is how they will execute and implement the plan they have defined.”
Among the survey’s other key findings:
- Insurers expect a wave of merger and acquisition activity as a result of the directive. More than half (55 percent) of respondents said they expect the implementation of Solvency II to increase consolidation in the insurance industry.
- Capital requirements are expected to increase. Two-thirds (66 percent) of the insurers surveyed expect an increase of capital requirements in the life insurance industry, and 61 percent expect an increase in the property and casualty insurance sector.
- Positive impacts expected for the industry and individual insurers. Nearly all (97 percent) of the insurers surveyed said they expect Solvency II to have an overall positive impact on the insurance industry, and 97 percent said they expect a positive impact on their company.
