Insurance firms 'not prepared for new reserves rules'
MANY Irish insurance firms are not prepared for new EU regulations in the sector, the Central Bank's director of insurance supervision warned yesterday.
In a speech to the European Insurance Forum in Dublin, Fiona Muldoon said a number of the firms that her team supervises were not yet prepared for the Solvency II Directive, which is due to come into effect in 18 months' time.
Solvency II aims to make insurers in the European Union hold capital reserves in strict proportion to the risks they underwrite. Firms involved in riskier dealing will be required to hold larger reserves than more conservative peers.
The directive has been beset by delays at EU level but Ms Muldoon warned firms should not use the excuse of policy delays in Brussels to slow down their preparations, which have included submitting models for their business under Solvency II versus its predecessor.
"We continue to be concerned about the pace of implementation in many of the firms we supervise. It is our judgment that many of you are not as prepared as you think.
"We have the second largest number of internal models in the EU to evaluate, with 37 models currently in the pre-application process for approval.
"In the majority of cases we have seen applicants struggle to deliver on time to their own initial plans.
"There is an enormous execution and implementation challenge presented to these companies. We urge you and your groups to consider carefully the extent of the project management task and not to get caught out in your preparedness," she said.
Also addressing the conference was PwC's partner for financial regulation Garvan O'Neil, who highlighted the implementation will cost the Irish insurance industry more than €100m.
"The key factor not appreciated by many organisations is the cultural impact of Solvency II," he said.
"When one steps back and looks at how it is asking organisations to make decisions, to co-ordinate their control functions, manage their risks and evidence all of these, little can happen without a major cultural shift.
"These changes come with significant resource demands in areas where an abundance of resources does not exist. Separately, but equally challenging, to meet additional reporting requirements a significant IT implementation programme lingers in the long grass," he added.