Advisory firm LCP surveyed insurers’ complicity with Solvency II from across the UK and Ireland and found 98% have sufficient capital to cover Solvency Capital Requirement (SCR) but nearly a quarter failed to accurately fill out their Quantitative Reporting Templates (QRT).
Cat Drummond, LCP Partner and author of the report, advised firms to; “spend more time reviewing their public disclosures to ensure that their QRTs pass muster.
“Not only is accuracy essential in reporting to ensure compliance, but it saves time in the long run and reduces the risk of public embarrassment.”
The average ratio of excess funds eligible to cover the SCR is 206%, but nearly one quarter of firms would need to recapitalise if they experienced a loss the equivalent of their minimum capital requirement, according to the survey.
Motor insurers typically have the least financial buffer compared with other insurers, with some firms having to recapitalise significantly after the Ogden rate change and others concerned over material risk from uncertainty surrounding how the rate may change in future.
“Next year’s SFCRs will include discussions of how the Solvency II measures have moved since last year.
“It will be interesting to see how well those firms with lower levels of capital coverage now can weather future storms that lie ahead,” said Cat Drummond, Partner at LCP.
Areas of weakness in compliance with Solvency II regulations showed in some firms around sensitivity testing of the SCR and uncertainty within technical provisions.
Over a quarter of firms’ QRTs contained errors, the survey said most common mistakes include; incorrect figures, missing information and inconsistencies with the narrative reports which could undermine Solvency II’s key aim to bring greater transparency.
For many insurers Brexit remains a key focus, with some insurers having set up internal steering groups to ensure a smooth transition in EU business dealings after the UK leaves the EU.
