A survey published by Deloitte, which examined 50 insurance companies across 10 different EU countries, discovered that fewer than half of EU insurers have a dedicated capital management department, despite the Solvency II regulations coming into force at the start of the year.
"Our research shows capital management is not organised or governed in a coordinated way in insurers across Europe," said Andrew Holland, EMEA Solvency II co-leader at Deloitte. "Even where insurers have such a department, many depend on separate functions such as the risk, actuarial and investment departments.
"Solvency II requires a technical skillset, and there is heavy reliance on these areas. Without a joined-up view across all of these areas, there is a significant risk insurers could miss the whole picture. Strong and appropriate governance is needed to support a holistic view of capital management activities."
However, insurers are aware of the risks and are taking action. The Deloitte survey also discovered that nine out of ten believed that capital management would be a priority for them over the next five years, and about half of those questioned were in the early stages of pulling together a strategy.
"With such low interest rates, there is a significant opportunity and imperative for insurers to develop solutions that maximise their capital," remarked Claude Chassain, also EMEA Solvency II co-leader at Deloitte. "We expect to see a shift where companies develop less capital intensive products and a greater emphasis on reducing risk margins. This could lead to a diverse range of capital strategies coming out in the months ahead."