All of a sudden Solvency II does not appear too far off. True, the London Olympics will have come and gone before the 1 January 2013 deadline for implementation into EU Member States of the Solvency II Directive has been reached. However, now that many firms are busy responding to the Quantitive Impact Study 5, the final such impact study organised by CEIOPS, Solvency II seems that much more real and imminent.

To the extent they have not already focussed on these issues, (re)insurers are now fully taking on board the implications for them of Solvency II, including, amongst other matters, the impact for them given the corporate structure of their groups, their capital structures, the products they underwrite, and their corporate governance structure. Of particular interest to some (re)insurers is the extent to which hybrid and contingent capital will classify as tier 1 capital for the purposes of the new solvency capital regime to be introduced by Solvency II, tier 1 being the highest quality capital.

For those (re)insurers based outside the EU, but which have EU subsidiaries or which are part of a EU group, the equivalence assessments to be organised by CEIOPS will be keenly watched. Bermuda and Switzerland have made it provisionally into the first wave, as has (perhaps rather surprisingly) the US, but only with regard to group solvency and reinsurance. If a (re)insurer is based in a jurisdiction which is ultimately deemed to have an equivalent solvency regime to Solvency II, then all well and good. For those (re)insurers which do not, it is unclear what the potential implications might be but include the EU based member(s) of the group being required to post higher capital.

Solvency II will no doubt herald challenges for many firms. However, with any challenges there are also opportunities. There is a sense that many firms are now starting to strategically position themselves to take advantage of such opportunities.