Almost half of European insurers will not be ready for Solvency II by January 2014, reports Ernst & Young, but given an extra year, 90 percent say they will be ready by Jan. 1, 2015, the date proposed by the European Union.
Out of 160 large insurance companies queried by Ernst & Young’s European Solvency II Survey, 70 to 90 percent of British, Dutch, Greek, Polish and Spanish insurers have assessed that they can comply before 2014. However, 60 to 70 percent of Belgian, French, German and Italian insurers say they are not keeping up.
For these less-prepared countries, says Martin Bradley, the surveyor’s partner in financial services and global Solvency II lead, the main compliance issue rests atop Pillar Three of the requirements.
Up to 80 percent of insurers have made little progress on this third Solvency standard, which deals with data transparency on corporate obstacles, risk management strategies and capital adequacy.
Bradley says, “We know from those organizations that have started their Pillar Three projects, the emerging data deficiencies and significant process, control and IT challenges present an ambitious target to achieve within the current timeframes.”
Readiness for Pillar Two, or the governance and supervision, review and intervention guideline is also up in the air. Only 17 percent of insurance companies have formally assessed their risk-management systems and determined their effectiveness on potential outcomes.
“There is a risk that respondents have overestimated their readiness for Pillar Two, perhaps by placing greater emphasis on the existence and nature of a component than on the effectiveness of their risk management systems,” continues Bradley.
Data and IT readiness are also trouble areas, with nearly 69 percent of insurers saying they’ve met some or none of the data-management requirements, but many companies are struggling data integration standards across multiple partners.
Pillar One, or management of capital requirements, however, is on track, with seventy percent of companies focusing on capital optimization strategies during 2013.