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The QIS4 Impact Survey for Solvency II looks likely to get little support from the UK insurance industry, according to a survey carried out by insurance consultants, Watson Wyatt. Although 80% of the firms in the survey said they would take part, only a third of those surveyed said they were prepared to do the detailed calculations required, with the remainder only doing the high level simple calculations.
In April, the Committee for European Insurance and Occupational Pensions Supervisors (CEIOPS) launched the 4th Quantitative Impact Survey (QIS4) designed to fine tune the details of Solvency II, the EU’s Directive for capital requirements in the insurance industry (the equivalent of Basel II for finance) which will be approved next year for implementation in 2012. CEIOPS is the body charged by the European Commission with developing and implementing Solvency II.
The quantitative impact studies serve two purposes. By testing out the proposed requirements against real life situations, it allows CEIOPS to fine tune the calculations used in calculating regulatory capital. And by giving the participating insurance firms the opportunity to apply a draft Solvency II to their organisation, it allows them to decide on the necessary business and process changes to both take full advantage of the new capital calculations and to prevent themselves being caught out by the more capital-expensive areas. Failure to participate fully, despite any views as to the value of Solvency II, therefore must be seen as a risk and as commercially short-sighted. One cannot believe, at this stage, that Solvency II will not happen – although it appears that some still do.
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