July 2009
Industry Matters:
Industry Matters:
(June 2010) Time to rethink APH reserving?(October 2009) Scottish Lion shock decision will be appealed, vows PwC(September 2009) Legacy industry debates ramifications of Scottish Lion ruling(August 2009) Ruxley on the hunt for APH run-off business(July 2009) Industry Matters: Solvency II The Clock Is Ticking(June 2009) Cavell Rendez-Vous: Back to reality in run-off pricing(Summer 2008) Legacy Leaders - The Norwich Rendez-Vous rountable(Spring 2008) Time to reconsider reinsurance
Insurers and reinsurers must consider the potential capital implications of Solvency II. Not only will it create greater transparency, but it is also likely to require increased capital to support specific elements of business, including liabilities in run-off.
On the plus side, this focus should result in more efficient business, which will complement the growing focus of shareholders on cycle management and returns on equity. However, it is also coming at a time when availability of capital is at a premium.
In business terms 2011 and 2012 are not that far away. Indeed, many forward-thinking insurers and reinsurers have been working for some time to bring their business into line with the expected provisions of Solvency II.
Download Industry Matters - Solvency II: The Clock Is Ticking
As part of this process, various underwriting entities also have been consolidating and streamlining old year liabilities - whether discontinued business or mature tails on continuing books - in their drives to achieve capital and cost efficiencies.
This is a significant first step. The next will be when underwriting entities en masse start to focus on the potential to turn liabilities into assets by selling portfolios to third party specialists, a process that is already starting.
As such, Solvency II could well turn out to be the catalyst for a significant shift in strategic thinking on prior year liabilities, a shift that many would argue is overdue.
Juliette Winter is a director of Ruxley Ventures