Media Briefing Note: FSA to Work With Insurers to Avoid Costs From 12 Month Delay to Solvency II
08 November 2011
LONDON, 8 November 2011 - Commenting on the announcement yesterday that the Financial Services Authority (FSA) plans to work with insurers to help them avoid costs from a 12 month delay to the introduction of Solvency II, Steven McEwan, Of Counsel in Hogan Lovells Financial Institutions Group, said:
"Many UK insurers will feel relief at the FSA's announcement. Running the ICA model is a very resource-intensive process, and it would be an enormous strain if insurers were required at the same time to submit preparatory reports based on separate Solvency II models. Given the similarity of the objectives of the ICA model and the Solvency II model, it would be sensible for the FSA to treat a fully operational Solvency II model as being sufficient for ICA purposes during 2013".
However, he noted that firms proposing to use a model for purposes of Solvency II are not the only ones who might be affected by the 12 month delay:
"Firms which are planning to use the standard formula, rather than a model, to calculate their SCR under Solvency II will also be placed in a difficult position during 2013, as their systems will need to be able to generate preparatory reports using the standard formula while at the same time carrying out calculations for purposes of the ICA. It will be interesting to see if the FSA will also allow a standard formula calculation to be sufficient for ICA purposes."