Solvency II and exposure to Greek sovereign debt could force Greek banks to dispose of their bancassurance business, according to Nick Papadopoulos, Partner and Insurance Industry Leader for Greece at PwC SA. The European debt crisis is also affecting investment in the industry. “Insurers are hesitant to commit significant funds due to increased market volatility and uncertainty,” Mr Papadopoulos said.
The Greek insurance industry employed about 8,500 workers in 2009 (according to the latest available figures from the CEA), down from 9,000 before the crisis. The number of insurance firms has also dropped to 82. However, the industry is characterised by a disproportionately large number of small players (approximately 73). According to Mr Papadopoulos, “The small players, which are mainly P&C insurers, are unlikely to be in a position to comply with the new solvency regime.”
Major preparation efforts for Solvency II began this year and Greece’s new insurance regulator, the Bank of Greece, has requested all insurers to file their QIS 5 submissions in November.
“We understand that most of the Greek insurers are opting for the standard formula for the calculation of their solvency capital requirements,” Mr Papadopoulos said.
“The regulator engaged in individual discussions with the key insurance players this summer in order to gauge readiness and track progress towards meeting the Solvency II standards.” The Bank of Greece also provided insurers with high level guidance on meeting Pillar II requirements.
It is understood that the majority of the key insurers were currently in the process of upgrading their management information systems and embedding more robust processes to comply with the new regime.
EIOPA kept its recommendation that Japan’s regulation for reinsurance is deemed equivalent with Solvency II. The final report on the first wave of equivalence sought by Japan, Bermuda and Switzerland was published on 26 October 2011.
“Japan fared very well in the consultation,” according to Kuni Kawasaki, London Liaison for industry and Government Affairs, Mitsui Sumitomo Insurance. “Given that FSA Japan and the industry had been strongly pushing the view that Japan’s supervisory framework for reinsurance was indeed equivalent with Solvency II, EIOPA’s endorsement to that effect will certainly be welcomed,” he said.
It is now likely that FSA Japan will seek equivalence for the remaining parts of their regime as well.
Mr Kawasaki said equivalence will help foster better understanding between supervisors. “It is an excellent thing for supervisors to better understand each other’s frameworks and be engaged in regular dialogue. A higher level of transparency and confidence between jurisdictions benefits all stakeholders.”
Comments on the consultation were issued by the Association of British Insurers (ABI), General Insurance Association of Japan (GIAJ), Financial Services Agency, Japan (JFSA) and Life Insurance Association of Japan (LIAJ).
The final decision on equivalence is due to be made by European Commission in the summer of 2012.
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