Solvency II: Are We There Yet?

December 2010 presentation by

Claude Penland, Associate of the
Casualty Actuarial Society
 What is Solvency II?
• Solvency II is the updated set of regulatory
requirements for insurance firms that
operate in the European Union.
• See Wikipedia at
http://en.wikipedia.org/wiki/Solvency_II
• More info at www.SolvencyDeux.com
 Solvency II
Side Effects, Part One
• Insurers might need to outsource their asset
management http://bit.ly/aeaqhy
• Stock portfolios sold off http://bit.ly/cZ56br
• Captives might need to be run off http://bit.ly/cYq7w4
• Specialist employee costs are being jacked up
http://bit.ly/9Mt0J0
• Not enough regulators with experience http://bit.ly
/a7i21O
 Solvency II
Side Effects, Part Two
• International Financial Reporting Standards
and Solvency II hit companies twice and
from different angles http://bit.ly/9awkgy
• Demand for bonds may be driven
artificially high (and yields low) due to
dumping of equities and buying of bonds
http://bit.ly/bu3YM3
• Cost overruns http://bit.ly/cr4tPt
 Is Catastrophe Risk
Appropriately Represented?

• Mega Broker says no http://bit.ly/cHHoGz

• Aon Benfield says no http://bit.ly/9Dbgt3
• Perils says that’s a mighty big catastrophe
that insurers are expected to be prepared for
http://bit.ly/9UENg2
 Solvency II Committees
• Ironically, they say they must now simplify
the plans they’ve charted.
• Read more at
http://www.claudepenland.com/2010/11/30/
more-solvency-ii-hand-wringing-coming-ou
t-of-european-mouths/
 European Pensions
• Pension Funds & Insurers disagree.
• Pension Funds don’t want to be regulated by
Solvency II.
• Insurers say what is good for the goose is good for
the gander.
• Read more at
http://www.claudepenland.com/2010/12/01/europ
ean-insurers-versus-european-pension-funds-who-
will-win-the-solvency-ii-argument/
 Final Points
• Most recent Solvency II test results might
be released in March 2011
http://bit.ly/aZZF3z
• Japan, Switzerland and Bermuda are going
through “equivalency tests”
http://bit.ly/cnA5v1
• Expect M&A http://bit.ly/ae75Yk
• Expect Redomiciles http://bit.ly/bnhumt