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30th May 2012

Report highlights action being taken by UK insurers in readiness for Solvency II

A report from Deloitte highlights an increase in the number of insurers which plan to re-price and reorganise their product mix in response to the introduction of Solvency II regulations. The latest edition of the annual Deloitte Solvency II survey, conducted by the Economist Intelligence Unit, found that:
-36% of general insurers plan to re-price products in the run-up to Solvency II–significantly up from 19% last year
-Life companies are more likely to change their product mix- 26% of life companies say they will do so compared to 8% for non-life companies
-There has been a big fall in the number of insurers which plan to restructure their business. Less than a quarter (23%) say they will re-organise their business–down from 47% last year.
Rick Lester, lead Solvency II partner at Deloitte, said
“This year’s survey has identified interesting developments in insurers’ approaches to Solvency II and many have reviewed the way it will be implemented. In past surveys insurers have talked of the need to restructure and reorganise their business; now they are analysing the risks they run and reviewing the amount of capital they need to write these risks, and adjusting their pricing and product mix accordingly.
By adjusting their product mix, insurers are able to optimise the diversification of the different risks in their portfolios. This may lead some companies to consider acquiring books of business while others may withdraw from some parts of the market. We’re also seeing increasing use of reinsurance and hedging mechanisms across the industry to lay off more capital-intensive risks.”
The report is based on a survey of 60 UK-based insurers, which ascertained their latest views on Solvency II and reassess their readiness for the new regime. Respondents covered all types of business from smaller, stand-alone organisations to large groups.
Respondents were grouped by size with the very largest insurers reporting more than £5bn in net written premiums (NWP); large insurers with between £1bn and £5bn NWP; those with £500m to £1bn; £300m to £500m; £100m to £300m; and less than £100m NWP. 30 respondents were life companies, 28 were non-life while two were composite insurers.