UK insurance companies not in line with Solvency II requirements

Accountancy Moore Stephens has warned that some existing internal business models in the UK insurance industry may not be in line with standards required under Solvency II, the EU project to create a system of risk-based prudential regulation in the insurance sector.

Simon Gallagher, head of the Moore Stephens industry group, said: "Insurers face a variety of challenges in achieving Solvency II compliance, some of them entirely new to the industry. But the biggest challenge is likely to revolve around the development of compliant internal capital models, or the customisation of existing models and - most importantly - the embedding of those models into day-to-day business practices."

Writing in the Moore Stephens newsletter Insured Interest, Mr Gallagher explained "Many companies in the insurance sector already have internal business models, but the empirical evidence to date suggests that these are generally not of the standard which will be required under Solvency II. Internal models must be embedded into the structure of everyday operations, and must be capable of anticipating changes in the industry or in the financial markets, or at least reacting to change - as, for example, in the case of the current credit crunch - quickly enough to protect the business."

He concluded: "Firms need to submit details of their proposed approach to capital modelling to the FSA by June 2009, failing which they will be required to use the Directive's formulaic approach, which can be expected to be more onerous and less flexible than any independently developed model. To do that, they are likely to need access to independent actuarial skills and the technical expertise necessary to build and adapt internal models to the required regulatory level, and to provide third-party validation of existing systems. This in turn has serious implications for meeting the overall Solvency II compliance deadline of October 2012."

  • LinkedIn  
  • Save this article
  • Print this page  

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected].

You are currently unable to copy this content. Please contact [email protected] to find out more.

You need to sign in to use this feature. If you don’t have an Insurance Age account, please register now.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: