Small cost for Solvency II compliance

by Richard Kilner

Story link: Small cost for Solvency II compliance

Accenture (NYSE: ACN) published a survey today which reveals that over 75% of the major insurers within Europe spending less than €25m on Solvency II compliance (up to 2012).

Over half forecast a cost of under €5m.

The Solvency II directive was created by the EU, and is designed to harmonise solvency regulations throughout the union.

It comes into effect in 2012.

The measures have been widely supported, with those surveyed reporting they believe it will support their needs as a business, bolster shareholder confidence and improve capital management.

Accenture estimates the UK cost of the directive to be around £300-400m.

UK-based insurers are already compliant with the Individual Capital Adequacy Standards, set up by the FSA, and have thus already met certain standards required by the directive.

However, under a fifth of respondents have stated that they are well prepared for the instigation of the directive, with areas such as IT systems commonly given as needing improvement.

Core risk-management capabilities is one the areas most in need of betterment prior to the directive’s introduction, with a majority of respondents saying they need to make improvements.

Eva Dewor, a senior executive with the firm, has stated that 93% of insurers think the new rules will give European insurers an edge over their rivals but that many have yet to put into effect the proper risk management capabilities.

The survey has also revealed that the primary grounds cited for lack of preparation is a lack of resources.

The directive is also predicted, by more than eight-tenths of respondents, to increase the merger and acquisition activity within the industry.