In another speech last week, Ken Hogg set out what work firms should be concentrating on in terms of their preparations for Solvency II. There remain a number of challenges for firms in terms of preparations. Firms must ensure that they have adequate resources in place to support and deliver the many changes which Solvency II will require. Firms should be putting in place suitable resources now rather than waiting until the last minute. A review of risk management and governance frameworks should be undertaken to ensure that systems and controls are sufficient for Solvency II. One of the biggest challenges which firms face will be integrating the data which they currently have into a consistent and robust source of management information.
Firms will be required to report more information to their supervisors. As an example, Mr Hogg mentioned that it is likely that firms will need to report all their individual asset exposures to the FSA on a quarterly basis.
In terms of actions that insurance firms should now be taking, Ken Hogg identified the following:
- Know the requirements. Firms should have an understanding of the Solvency II Directive text. The Directive has enough information for firms to begin working on their implementation plans.
- Know the impact. Firms should consider how the new requirements will affect their business. Solvency II may have a fundamental impact on the business and this needs to be identified and managed as soon as possible.
- QIS5. The FSA would like to see all firms engage in the fifth Quantitative Impact Study (QIS5) during the summer. QIS5 will help firms determine the impact of Solvency II on their business.
Ken Hogg also discussed the FSA’s negotiations in terms of the development of a global regulatory structure for insurance. As a member of the International Association of Insurance Supervisors (IAIS), the FSA has been in discussions about setting some global standards for insurance regulation.
To view the text of this speech: Solvency II - a regulator’s perspective