The Prudential Regulation Authority (PRA) has held a Solvency II conference in London.
The regulator explained that it expects Solvency II to be demanding for all insurance firms, particularly as all firms will need to comply with the European Insurance and Occupational Pensions Authority preparatory guidelines that come into effect on 1 January 2014.
Charles Garnsworthy, PricewaterhouseCoopers’s UK Solvency II leader, said: "The PRA indicated it expects Pillar 3 to present the greatest challenge to most firms. PwC's recent industry survey revealed that 75 percent of insurers expect to invest in new systems to meet the Solvency II Pillar 3 requirements. The majority of firms should plan to report to their supervisors from mid 2015. Currently we expect this may apply to all priority 1, 2 and 3 firms plus the subsidiaries of large groups.”
"Regarding the Pillar 1 capital requirements, firms that plan to use an internal model must hit their approval slot. If not they will go to the back of the queue. Firms must have a contingency plan in place in case they don't get their internal models approved in time. Even firms taking the ‘standard formula’ route need to be communicating now with their supervisor, especially if they intend to make use of unique selling points or partial internal models.
"Resourcing is likely to be a major challenge in all of this, not least for the PRA itself. Firms therefore need to take the initiative and ensure they get their submissions right first time, to get the right capital assessment in place for the go live date of 1 January 2016."
A survey conducted in November by PA Consulting Group aimed to assess how prepared the industry is for Solvency II.
The survey found that two thirds of insurers do not expect to be ready to meet EIOPA’s preparatory guidelines on the System of Governance by January 2014, which appears to contradict the expectations of the PRA.
