Deloitte, the business advisory firm, comments on a speech made by Paul Tucker, Deputy Governor of the Bank of England, at the ABI on 13 March 2012 about the cost and complexity of complying with Solvency II.
Mr Tucker said the Bank of England and FSA were dismayed by how much it is costing the industry and regulator to adapt to Solvency II, and that it risks being too complicated.
Rick Lester, lead Solvency II partner at Deloitte, said:
“Paul Tucker highlighted the industry and regulator’s frustrations with the costs of transitioning to the Solvency II regime and the risk of regulators drowning in data that cannot be absorbed or which may distract from the big risks. The industry will be pleased to hear this and, to avoid any further unnecessary costs, will be keen to ensure that a proportionate approach to model approval is applied consistently across Europe with the extent of supervisory engagement and interaction being aligned directly to the regulatory requirements.”
Mr Tucker also commented on a broader range of insurance regulatory issues, including the significance of insurance firms to financial stability and the need for insurance firms to be able to fail in a controlled way.
David Strachan, co-head of the Deloitte Centre for Regulatory Strategy, said:
"This is a wake-up call for anyone who still believes that it's going to be ‘business as usual’ when insurance regulation moves to the Bank/Prudential Regulation Authority. It balances a clear scepticism for the often repeated assertions that insurance can never give rise to significant systemic risks with a recognition that there are some significant underlying differences between insurance and banking.”
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