Solvency II will be at the top of every insurer’s agenda for the next three years, it says
Britain's Financial Services Authority (FSA) published its Solvency II Directive update paper following the Directive passing its final hurdle at the ECOFIN meeting on May 5.
Martin Bradley, head of the Ernst & Young Solvency II Taskforce, commented: “The FSA wants to ensure that every insurance business under its supervision knows the urgency of meeting the 31 October 2012 deadline. Following yesterday’s ECOFIN vote, Solvency II (SII) will be at the top of every insurer’s agenda for the next three years.
“Since September 2008, the FSA has formally written to large retail insurers regarding readiness for their SII programmes. In the wake of today’s FSA update paper, all outstanding insurers can expect a ‘Dear CEO’ letter.
“Each insurer will also be receiving a separate Internal Model Approval Process (IMAP) letter from the FSA. Late June 2009 will be a moment of truth for many insurers when replies will be due. Insurers must be ready to declare they will seek internal model approval; choose between full or partial internal model; and commit to join the pre-application process during 2010. The FSA wants phased entry into this process during Q2 & Q3 of 2010.
“The resounding message from the IMAP letter is that UK insurers mustn't underestimate the work involved in transitioning their ICA models, in development since 2004/2005. It won't be easy for Individual Capital Adequacy (ICA) models to become fully SII compliant as internal models integrated within a wider SII compliant risk management framework, interacting across all activities of the firm.
“We look forward to the FSA’s Stage 1 thematic review report in September 2009, as it will give greater clarity for all involved in Solvency II. The Stage 2 thematic review, planned to begin in October 2009, will represent the last phase of possible discussion, beyond which everyone will be headlong into implementation.”