The industry is not expecting the big rise in capital requirements feared under earlier versions of Solvency II. However, CEIOPS is concerned that the rules have been weakened too far, which could harm policyholders.
European insurers remain concerned they will be required to hold more capital under new rules for the industry that will be tested this summer.
A number of areas of the industry are still expecting to see higher capital requirements under the rules – known as Solvency II and due to come into force in early 2013 – although the industry as a whole is not expecting the big rise in capital requirements feared under earlier versions.
However, the European regulators who designed the rules – the Committee of European Insurance and Occupational Pensions Supervisors, or Ceiops – are concerned that they have been weakened too far, which could harm policyholders.
Insurance companies across the continent will run the fifth and final quantitative impact study (QIS 5) on the effect of the rules between August and November this year, with the results due to be published by the European Commission next April.
The terms of the test were published this week after months of negotiations over the calibration of the capital charges related to different kinds of liability and asset risks. Some areas were softened significantly following vociferous industry protests over the excessive prudence of the rules.
Carlos Montalvo Rebuelta, secretary general of Ceiops, said that changes made to the final specifications for QIS 5 by Brussels appeared to deviate from the principle of risk-based supervision.
“Rather than linking capital requirements to risks, the latest proposals seem to be defining risk charges on the basis of existing capital available, which after a severe crisis that has affected the whole economy and society is clearly not at the levels it was prior to this crisis,” he said.
The most stringent requirements are in the standard model, which will be used by smaller, less sophisticated companies, while bigger and more sophisticated groups will run an internal model designed by themselves.
But for large groups such as Axa, Allianz, Aviva and Generali, the concern is that they will be asked arbitrarily to hold extra capital if their models produce a number that is much lower than a conservative standard model that applies to smaller rivals.
The European Commission said this week that it was “very important to stress that QIS 5 is a test”, and that the rules could be changed next year before they were set in stone.
Many in the industry see this as a reason for insurance companies to be optimistic that they could win further concessions.
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