The president of the International Federation of Risk and Insurance Management Associations (IFRIMA), Carl Leeman, expressed satisfaction that the implementation of Solvency II will take longer than originally expected, following its postponement to 2014, as in his view the new Directive is not going to help risk managers.
Mr Leeman refuted the argument, often branded by regulators, that the Directive will protect buyers by reducing the risk that insurance companies will become insolvent and end up not paying their dues. He noted the insurance sector has shown remarkable financial health in recent times and could not be tested more stringently than by the series of catastrophes around the world over the past two years. Despite all the losses suffered, the sector has remained financially sound.
Mr Leeman forecast that the implementation of the Directive will actually cause a reduction of capacity in the market. Long tail risks will become more difficult to service and there will be a lower number of insurers for buyers to choose from, he said. Insurance companies will also have less appetite for risk, he said, while at the same time they will feel less able to come up with creative solutions, as their focus will increasingly be on compliance rather than on innovation.
But Mr Leeman had harsh words for the insurance market when speaking about the need for better solutions for global programmes. This is a matter of particularly concern to multinational companies that need to integrate their master policies with local coverages in Latin American countries like Brazil. He noted that the best risk managers can hope for today is good local coverage in their home country and a blend of allegedly good local standards, or locally registered wordings, in other countries. But that means buyers can only 'hope and pray that this will suit their needs", he said.
He conceded however that insurers do face challenges when attempting to provide adequate solutions for global programmes. "We know it is not an easy task to give us what we want, among other things due to local regulations and protective measures in some countries."
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