The recent crisis highlighted more than ever the need for a deep overhaul of the supervisory framework within which the European Insurance industry operates. Solvency II will hopefully efficiently replace the current ill-adapted Solvency I rules by establishing a genuine riskbased framework for EU insurers.
In the Spring of 2009, the European Parliament and the Council adopted Solvency II principles. This adoption is largely positive for the Insurance Industry as well as for policyholders, as it gives value to a better management of risks and encourages the right behaviours. In particular, it should allow for the recognition of diversification and advanced risk transfer techniques to ensure a more dynamic management of financial risks. There is no doubt that Solvency II will have an impact on the portfolios of assets of European (re)insurers.
However, before its full achievement by the 1st of January 2013, the adoption process of this ambitious reform still has a long way to go. To fully deliver its promises it should be supplemented with proper implementation measures that are currently under very intense discussions and whose features will be tested through the 5th quantitative exercise (“QIS 5”).
Source : AXA Real Estate