Most of the UK's insurance companies have criticized the European Union's (EU) impending Solvency II for insurers, saying that the new capital rule will increase their financial burden.
According to a report released by Grant Thornton, just 6% of insurance industry executives said the costs associated with Solvency II are reasonable.
Schedule to take effect on 1 January 2016, the new rules will force insurers to equivalent their capital buffers more closely with the risks on their books, with aims to better protect consumers, in the event of a financial downturn.
Grant Thornton interviewed approximately 77 senior executives in the UK’s non-life, life and health insurance markets for over two months, and found widespread concerns across the industry.
Nearly 76% of respondents, who participated in the survey, said the costs of Solvency II are disproportionate, whereas 65% stated the value added will not justify expenses incurred.
According to the report, almost 62% participants noted that preparations are distracting senior management from the day-to-day running of their business.
Grant Thornton actuarial and risk UK head Simon Sheaf was quoted by postonline.co.uk as saying: "The volume of work and resources that have gone into preparations for Solvency II compliance have been astounding and insurers have substantial reservations regarding the impact this has had on their businesses."
UK insurance chairman and Grant Thornton partner Craig Scarr added: "The industry has largely been in favour of the principles behind Solvency II for some time. However, the opacity around implementation deadlines and precise requirements are continuing to make the pill-swallowing an even more bitter exercise."
"Businesses rely on certainty, and despite the role of risk in the insurance industry, the sector still feels as though it’s being unnecessarily burdened by the complexities of Solvency II."
Image: British insurers criticize EU’s insurance Solvency II. Photo: courtesy of digitalart/freedigitalphotos.net.