“How long will monetary policies keep interest rates at current levels, or even lower? No one can say, every opinion is legitimate. What is certain is that the entire insurance world is shaken to its foundations” and this is “the most demanding challenge”. The alarm was sounded by Salvatore Rossi, president of IVASS, who spoke on Thursday in Rome during a conference organized by the Supervisory Institute on the launch of Solvency II, the new set of rules which from 2016 January XNUMX regulates the activity of European insurance companies.
Along the same lines Maria Bianca Farina, president of ANIA: “The persistence of low interest rates should lead us to change the way we do insurance. We manage this phase with the Units and hybrid products but we will also have to change the traditional products. The challenge before us is that we will have to transform ourselves into looking for new ways of managing savings in the medium and long term".
As far as supervision is concerned, "the harmonization and convergence of practices" remains an absolute priority for the system and the various Authorities must "put aside national pride", undertaking to disseminate "best practices regardless of where they are been developed – continues Rossi -. It is unthinkable that a new regulatory system can be managed in a coherent way if one accepts for too long that the playing field is not levelled, that there are differences in the approach between national supervisors and discrimination in matters of policyholder protection between the various countries . This has often happened with Solvency I, which has allowed for the diffusion of national peculiarities. Solvency II severely limits these specificities and therefore facilitates the work of harmonizing supervisory practices, with a view to truly European level supervision of the insurance sector”.
However, as noted by Alberto Minali, group chief financial officer of Generali, “the perception of the market is that a common regulatory framework is still lacking, despite the effort that has been made to set it up. The idea that exceptions still exist between different countries and that national interests can still prevail is creating a climate of distrust”.
On the other hand, according to Gabriel Bernardino, president of the European Insurance Authority (Eiopa), “it's all about expectations: it was unrealistic to expect Solvency II to be applied immediately and uniformly in all countries. We are only at the beginning: we must not be naive. It's like a journey, it takes time." Also because, as noted by Tom Wilson, group chief risk officer of Allianz, we must not forget the "enormous differences that exist between the various countries in terms of sovereign risk, taxation and the financial products offered".
Just the financial aspect is another crucial chapter in the analysis of Solvency II. The new rules "push insurance companies towards treasury bonds - continues Minali -, because they bring with them an implicit distortion towards the fixed-rate bond market", which is preferred for its safety, but "does not give the best returns and this it will have consequences on the operational performance of the companies in the long run”.
The challenges proposed by Solvency II are therefore not few, nor simple to face, and risk putting smaller companies in particular in difficulty. If nothing else, says Christian Thimann, member of the Executive Committee of Axa, because "the big companies started preparing earlier: we, for example, started in 2010".
From this point of view, for Minali the point is not in the “complexity of the products, which is the same for everyone, but in the ability to invest to adapt to the new context. Solvency II does not create problems in itself: the problem is rather that in some cases there is a lack of tools to adapt”. Bernardino, however, says he is "sure that we will continue to have a landscape with companies of different sizes".
In any case, according to Rossi, the transition to the new regulatory system is "revolutionary", it will require "a profound cultural change" - a plan on which Italian insurance companies have "a gap to fill" - and will bring with it crucial innovations in market disclosure , because "the new rules will allow all interested parties to know the financial position of an insurer with an unprecedented level of detail", even if "to complicate the picture, in Italy, there is the coexistence of the Solvency II information system with financial statements drawn up according to accounting standards that present non-comparable metrics. This can be a source of confusion and misunderstandings."
