EU should not water down the Solvency II directive or postpone the legislative process, said the CRO Forum
The global economic crisis underscores the case for Solvency II, in particular its principal based, economic and risk sensitive approach, said the CRO Forum.
The crisis has raised serious questions about the effectiveness and efficiency of risk management within the financial services industry, according to the CRO Forum, a group of chief risk officers from Europe’s biggest (re)insurers.
While the insurance industry is not immune to the effects of the current crisis, it is less exposed to the problems in credit markets than other parts of the financial services industry.
‘Insurers are primarily funded by policyholders, which is a more resilient source of funding,’ said the statement.
‘Solvency II is the right response to the challenges of a crisis like this. In many respects, Solvency II is a reflection of the advances that the insurance industry made in terms of ERM in the aftermath of the 2000/2003 crisis created by the burst of the dot-com bubble. These efforts have clearly helped the European insurance industry to navigate through this crisis,’ said Jo Oechslin, Munich Re chief risk officer and chairman of the CRO Forum.
‘(Solvency II) will foster cooperation between national regulators, which is essential for the stability of the insurance industry,’ said the Forum in a statement.
‘EU legislators should not water down the Solvency II directive or postpone the legislative process. This would be like terminating a marathon at the 40 kilometer mark,’ added Oechslin.
The Forum stated that models should be taken with a pinch of salt, and their results need to be complemented with effective internal controls—and common sense.