Solvency II in focus – Why Solvency II affects asset managers, not just insurers

In the second part of the serialisation of a Solvency II study, published recently by Clear Path Analysis, a roundtable discusses how unlevel the competitive playing field will become for European and non-European insurers, and why asset managers also need to prepare for impacts from the regulation.

The full report is available at https://www.clearpathanalysis.com/reports/solvency-ii-the-global-dimension-2012/

In the extract, below, John Siena of BNY Mellon argues “There are serious issues with how investments are addressed and how capital raising activities of issuers will be impacted. Asset managers will be having to come to terms with these impacts as well.”

Myles Neligan, European insurance correspondent for Reuters: Is it likely that Solvency II will prompt non-European insurers to exit Europe?

John Siena, assistant general counsel, head of EMEA external and regulatory affairs, BNY Mellon: We do not see it so much as an exit but more in terms of a global footprint where there is a lack of harmonisation and equivalence and this, in turn, leads to disfavour of the European sector over other geographical regions. It is difficult to connect the dots on that level of granularity in order to distinguish whether there will be physical exits from the European market of insurance providers.

Bruce Porteous, head of solvency II & regulatory development at Standard Life: For non-European insurers it is a slightly different issue to that of European insurers operating in third country markets. Non-EU insurers operating in the EU are still able to compete on a level playing field locally because everyone in Europe will have to comply with Solvency II at a local level and there are generally no additional constraints at the non-EU group level.
Therefore, there is not a real need for insurers to exit Europe on competition grounds.
However, there has been evidence of some companies, who perhaps do not want to incur the expense of complying with Solvency II, exiting Europe. Some supervisors are requiring firms to build internal models when perhaps the EU operation is fairly small and the non- European parent is not prepared to sustain the cost. This means that you might see non-EU insurers withdrawing from Europe – however, I do not believe that this would be for equivalence reasons, it would be more to do with the cost of compliance.

 

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