The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) has co-ordinated a series of quantitative impact studies (QIS) which gauge the impact of the proposed Solvency 2 regime on insurers. With the support of FSA as well as other national regulators, CEIOPS has asked insurers across Europe to cooperate in the studies in order to get an idea of the impact of the proposals and to determine how prudential standards should be calibrated.
The overall objective of QIS3 was to study the effect on insurance undertakings of the restatement of the value of both assets and liabilities under current CEIOPS proposals for the Solvency II framework. It also tested the proposed capital requirements – the Minimum Capital Requirement (MCR) and Solvency Capital Requirement (SCR). The third quantitative impact study (QIS3) took place between May and July 2007. The scope of QIS3 was also extended for the first time to include groups issues.
The results show an overall reduction in firms’ solvency ratios compared to those under Solvency I. This result, however, was expected in the light of the proposed changes to the valuation methodology for technical provisions, and the known deficiencies in the risk sensitivity of the Solvency I capital requirement. Across the industry as a whole, there would have to be a substantial buffer of capital in excess of the SCR, but the effect varied between firms. Over 80 per cent of UK firms had a surplus of available capital over the standard SCR as proposed in QIS3.
CEIOPS published the results of QIS3 on 21 November.
For further information: FSA publishes UK report on the third quantitative impact study (QIS3) for Solvency 2 (PDF 364KB)