No apologies for returning to the thorny issue of Solvency II
This month saw the final publication of Quantitative Impact Study 5 (QIS5), and the outlook for the reinsurance industry was mixed.
The European Commission has listened to intense industry lobbying and has softened some of the more excessively cautious elements in its latest approach to the regulations. But it seems that insurance groups that use their own solvency models, and thus come to lower capital requirements than those using the standard model, could nevertheless be arbitrarily required to hold extra capital.
The secretary-general of Ceiops, Carlos Montalvo Rebuelta, has publicly stated that the latest changes to QIS5, since it was published in draft form earlier this year, deviated from the principles of risk-based supervision.
This is something reinsurers may wish to bear in mind when developing strategies for dealing with excess capital..
Solvency II also brings increased costs. In order to develop those all-important models, reinsurers need the right staff on board.
As we explain in our GR focus on financial modelling,, the role of the actuary has never been more important and, as a result, never more expensive.
According to executive search firm Kinsey Allen International, the average day rate for an interim risk analyst in the UK was £310 in 2009. That figure has already risen by 30% to £400, with further inflation expected, along with changes in analysts’ working terms, such as a predominance of 12-month contracts.
So act fast! Getting the right people on your side now may look expensive – but failing to do so could cost your business a whole lot more.
Ellen Bennett is executive editor of Global Reinsurance.