DENMARK – The Danish financial regulator Finanstilsynet is in talks with industry association Forsikring & Pension (F&P) to create a standard methodology for solvency requirements for insurance and pension companies.
The new methodology is necessary to bridge the now longer gap until the EU’s Solvency II regime is implemented, the regulator said.
Per Plougmand Baertelsen, director of Finanstilsynet’s life assurance division told IPE: “We are introducing one standard methodology, which will be inspired by QIS5, and a step in the direction of Solvency II.
“When examined in detail, it is evident that a number of different methodologies are being used to calculate individual solvency requirements (individuelt solvensbehov), which does not lead to the same level of policyholder protection.”
From the beginning of 2014, the Danish insurance and pensions sector will be required to adhere to new capital requirements based on an adjusted QIS5, the quantitative impact study for testing Solvency II capital requirements, the regulator said, adding that the adjustments were in line with the latest developments.
The aim of this is to promote an equal level of policyholder protection by closing existing regulatory gaps in relation to the individual solvency requirement.
As things stand, the individual solvency need is an insurer’s own assessment of its capital base, and the statement it makes depends on its risk profile.
“Since Solvency II is not here yet and has been postponed at least until 2016, there is need for a reasonable maintenance of the supervisory system,” Plougmand Bærtelsen said.
Finanstilsynet is currently in discussions with F&P about the details and implementation of the updated regulatory regime, he said.
“We are having a very constructive dialogue and open discussion about a more stringent setup,” Plougmand Bærtelsen said.
“It will be possible to use full or partial internal models to calculate the capital requirement.”
Another reason for devising the new regime is to ensure Danish compliance with international supervisory standards from the International Association of Insurance Supervisors (IAIS) and interim measures from the European Insurance and Occupational Pensions Authority (EIOPA), he said.
The aim of the guidelines from EIOPA is ensure a consistent and convergent approach to Solvency II preparation in EU, he said.
Up to now, Finanstilsynet has not released a formal proposal for the new regime, he said, adding that the authority will release a formal proposal this summer.