QIS4 — a half-baked approach?
A survey by Watson Wyatt has found that, although most UK insurers say they will participate in QIS4, less than 35% will be conducting an advanced recalculation in line with current QIS4 requirements. Its research also highlights that only 15% of those surveyed have performed a formal Solvency II gap analysis.
QIS4 is part of the process of assessing the likely impact of Solvency II regulations on the capital requirements of life and non-life insurers, and is due to be implemented in 2012. Not complying fully with the requirements of each impact study could reduce the time a company has to react to any increased capital requirements under the proposed regulation.
“Insurers that discover early enough that parts of their business generate excessive capital requirements under the standardised approach are giving themselves time to react,” said Mark Chaplin, global head of risk and value management services at Watson Wyatt.
“Options include campaigning to change the relevant part of the framework, preparing to apply for internal model approval, altering the risk profile of the business, for example, by taking risk mitigating actions or redesigning the products sold, or, if necessary, raising new capital. Delaying key preparation work runs the real risk of nasty surprises later in the process and may put companies at a competitive disadvantage to those taking earlier action,” he warned.
