Bob Stein sat down with Otto Thoresen, Director General of the Association of British Insurers, for an in-depth discussion on Solvency II.
Solvency II has been under development for many years and now may finally be moving toward adoption. Initiated before the recent financial crisis, its original objective was to bring consistency to the way financial regulation works across all of Europe, and to create a system of standards that each country would use.
According to Mr. Thoresen, because of the financial crisis, there is now pressure from the G-20 for a more standardized approach to monitoring the financial market. Regulators appear to be uncomfortable with the lack of control they have over internal models and assumptions, which firms have control over. Because of this, Mr. Thoresen says we are apt to see more intervention from regulators.
He also notes that there is now a stronger focus on Risk Management by the financial services industry than in the past, all the way up to the boardroom. Solvency II will be implemented at some point, but according to Mr. Thoresen, a bigger threat to the industry will be the new regulatory environment where everyone is financially constrained. The industry is going to have to ensure that it remains relevant.