The start of 2016 saw the implementation of Solvency II… yet two years on it looks like a lack of clarity remains, as revealed by a Willis Towers Watson survey. With IFRS 17 coming into effect in 2021, are insurers in for even more confusion and pressure?
According to the brokerage giant’s comprehensive actuarial functions survey of 39 property and casualty (P&C) insurers in the UK, 80% concur that “considerable uncertainty” regarding regulatory requirements continues to exist. This was particularly true for underwriting.
It was also found that, despite the uncertainty, 82% have not sought any external advice. In addition, 13% do not take the underwriting policy or process into consideration during the underwriting opinion’s production.
“The lack of clarity around such a central Solvency II requirement is a major concern as underwriting policies directly impact an insurer’s performance, underlining the need for better guidance,” commented Tammy Richardson, managing director, UK P&C leader, at Willis Towers Watson. “The findings also reveal underwriting as an area where the actuarial function could be adding more value by helping to produce and assess the overall underwriting policy framework and providing independent challenge.”
Meanwhile meeting the reporting timetable emerged as the biggest challenge so far when calculating technical provisions. And with new regulation coming into force less than three years from now, the global advisory firm doesn’t except an easing in this regard.
“With IFRS 17 fast approaching, timetables will continue to be squeezed and the pressure on insurers will intensify,” warned Willis Towers Watson actuarial function product leader Sanjiv Chandaria. “In order to meet these challenges, insurers will need to develop more efficient processes primarily through the use of the latest insurtech software and technology which will also free up scarce resources to focus on adding the most value.”
But he said understanding must come first.
“In order to make the best use of the latest technologies and software, however, a clear understanding of the regulatory requirements is an essential first step before implementing a more strategic approach to address today’s challenges of speed, frequency, and cost,” noted Chandaria.
The surveyed insurers had a combined underwriting value of more than £10 billion of premiums, as well as over £24 billion of reserves, in 2017.