Press Release
Contact: Tim Steele+44 20 7163 5850 tim.steele@bnymellon.com
New Solvency II insurance regulations go too far and policyholders will ultimately bear the costs, says BNY Mellon-Economist Intelligence Unit studyNew research sheds light on potential impact of Solvency II on retail consumers, the insurance sector and industry more generally
LONDON, March 1, 2012 - New research sponsored by BNY Mellon,
the global leader in investment management and investment
services, and conducted by the Economist Intelligence Unit,
found that a majority of institutions surveyed believe that
Solvency II oversteps the mark. And almost three quarters of
survey respondents (73%) agree that the costs to insurers of
compliance with the new regulations will be passed on to
policyholders, and there is concern that both corporates and
individuals may choose to be under-insured as a
consequence.
Encompassing a fundamental review of the capital adequacy
regime for the European insurance industry and set for
implementation in January 2014, Solvency II aims to establish
a revised set of EU- wide capital requirements and risk
management standards that will replace the current solvency
requirements.
The Economist Intelligence Unit conducted a survey of 254
EU-based companies, including insurers, other financial
institutions (excluding insurers) and corporates
(non-financial institutions). The research - Insurers and
society: how regulation affects the insurance industry's
ability to fulfil its role
- is available at www.bnymellon.com.
Paul Traynor, Head of Insurance, Europe, Middle East & Africa
at BNY Mellon, said: "There is an understandable tendency on
the part of regulators to focus more on protection than
risk-sharing, but that presents the insurance industry with a
challenge. The public want insurers to fulfil three key roles
for society: provide individuals with saving & pension
products and to insure them against specific risks; provide
corporations with an efficient mechanism to transfer risk;
and to be a source of debt & equity capital to industry.
"However, the survey suggests there is a real concern that
the cost of regulation may raise the cost of life cover and
annuities, perhaps beyond a tipping point. It also suggests
that, as currently calibrated, the regulations will
inadvertently crowd out debt and equity capital for industry
in favour of EU sovereign debt and unproductive cash
holdings. That will make it ever more difficult for insurers
to make those positive contributions to society."
Monica Woodley, Senior Editor at the Economist Intelligence
Unit, said: "A majority of respondents favour an
overhaul of insurance regulation in the EU and recognise the
importance of the sector to society. Indeed, 86% of insurers
surveyed believe the industry must contribute positively to
society. Our survey findings indicate that, although there is
a perception that something should be done to improve the
current situation and that harmonisation should bring its own
benefits, the proposed regime could be seen to be overly
cautious. The findings suggest that while the industry
welcomes the broad thrust of the regulation, certain
calibrations are wrong."
Solvency II was designed to ensure better protection for
policyholders, but raises important questions about the
extent to which consumers and corporates will ultimately foot
the bill for the new regulations
- either directly through higher costs or indirectly via less
comprehensive products. Meanwhile, the
demands of the new regime threaten to disrupt the key role
played by insurers as investors in the capital
This press release is issued by The Bank of New York Mellon to members of the financial press and media. All information and figures source BNY Mellon International unless otherwise stated as at December 31, 2011. The Bank of New York Mellon, London Branch, registered in England and Wales with FC005522 and BR000818
Branch office: One Canada Square, London E14 5AL Authorised and regulated in the UK by the Financial Services Authority.
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markets, by pushing them towards 'safer' assets with lower
capital charges, and away from the equities and
non-investment grade debt on which much private industry
depends for financing.
Only16% of respondents agreed that the proposed legislation
strikes the right balance when it comes to ensuring insurers
have sufficient capital to meet their guarantees. Insurers
and FIs (excluding insurers) are more critical of Solvency
II, with 55% believing the directive goes too far compared to
39% of corporates (non FIs). Less than one in five insurance
respondents (18%) believe that most insurers are
insufficiently capitalised under the present regime.
A majority of respondents believe that policyholders will end
up paying for implementing the directive, although insurers
are markedly less convinced (57%) than FIs (excluding
insurers) (82%) and corporates (non FIs) (69%) raising the
question of how they see the costs of regime change being
met. Over half of survey respondents (51%) believe the shift
to unit-linked policies, which put the investment risk on the
policyholder, will have a negative long-term affect on
pension and long-term savings provision, with life insurance
and annuities considered the products most likely to be
negatively affected.
Other key findings include:
BNY Mellon has insurance assets under custody of $2 trillion and its clients include 75% of top 100 life insurers and 70% of top 50 non-life insurers globally. The company manages in excess of $83 billion on behalf of insurance companies.
Notes to editors:-ends-
BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $25.8 trillion in assets under custody and administration and $1.26 trillion in assets under management, services $11.8 trillion in outstanding debt and processes global payments averaging $1.5 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. Additional information is available on www.bnymellon.comor follow us on Twitter@BNYMellon.
The Economist Intelligence Unit (EIU) is the world's leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organisations around the globe, inspiring business leaders to act withThis press release is issued by The Bank of New York Mellon to members of the financial press and media. All information and figures source BNY Mellon International unless otherwise stated as at December 31, 2011. The Bank of New York Mellon, London Branch, registered in England and Wales with FC005522 and BR000818
Branch office: One Canada Square, London E14 5AL Authorised and regulated in the UK by the Financial Services Authority.
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confidence since 1946. EIU products include its flagship Country Reports service, providing political and economic analysis for 195 countries, and a portfolio of subscription-based data and forecasting services. The company also undertakes bespoke research and analysis projects on individual markets and business sectors. More information is available at www.eiu.com or follow us on www.twitter.com/theeiu.
The EIU is headquartered in London, UK, with offices in more than 40 cities and a network of some 650 country experts and analysts worldwide. It operates independently as the business-to-business arm of The Economist Group, the leading source of analysis on international business and world affairs.
This press release is issued by The Bank of New York Mellon to members of the financial press and media. All information and figures source BNY Mellon International unless otherwise stated as at December 31, 2011. The Bank of New York Mellon, London Branch, registered in England and Wales with FC005522 and BR000818
Branch office: One Canada Square, London E14 5AL Authorised and regulated in the UK by the Financial Services Authority.