Research - 25.11.2011 - 00:00 

Insurance firms in a state of flux

Insurers are currently being confronted by a profusion of regulatory alterations. A study reveals that these are having an impact on the core business and will necessitate adjustments to the business model.


24 November 2011. The focus is on changes affecting risk management, but products and capital structures are also affected, as a study conducted by the University of St.Gallen (HSG) in cooperation with KPMG shows. 179 insurance companies in Switzerland, Germany and Austria were interviewed. It became apparent that besides FATCA (Foreign Account Tax Compliance Act), MiFID (Markets in Financial Instruments Directive) and the regulation of cross-border business activities, the introduction of the Swiss Solvency Tests (SST) and the Solvency II requirements constitutes the biggest challenges.

Switzerland most advanced with Solvency II

Whereas the SST has already been introduced in Switzerland, the EU has granted European insurers a transitional period until the end of 2013 for the introduction of Solvency II. 92% of the Swiss insurance companies interviewed assess the introduction speed of Solvency II as adequate or neutral on the basis of experiences gained so far. Conversely, 67% of German insurers and 45% of Austrian insurers consider the preparation time in the time window under examination to be far too short.

Mostly positive effects expected

55% of the insurers interviewed rate the requirements of Solvency II and SST as a positive development. The insurers expect a marked improvement in sensitivity to risk and corporate governance, and they expect these two factors to be accorded more weight by executive bodies. It is therefore not surprising that 82% of all the companies interviewed are confident that they will be able to implement the regulatory provisions and assume that they have the necessary capacities to do so.

Life insurers facing price corrections

Owing to the new requirements, many insurers have to rethink their product portfolios and their product differentiation with regard to prices and geographical diversification. Internationally operating groups, in particular, will have to reconsider how they will be able to cope with the increased workload-cum-expenses caused by operating two regulatory systems (SST / Solvency II) in parallel. A total of 90% of all insurance companies are therefore planning to adjust their price structure. Life insurers, in particular, will be active in this respect: 67% of them expect substantial effects on their products and services.

Photo: Photocase/

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