EUROPE – Just under half of European insurers (43%) would be ready for the Solvency II regulatory framework by January 2014, but nearly 90% would be prepared by 2015, according to a study by Ernst & Young.
The firm's European Solvency II survey of 160 large insurance companies across Europe also found that readiness varies significantly from country by country.
Between 70% and 90% of British, Dutch, Greek, Polish and Spanish insurers expect to be ready to comply before 1 January 2014, whereas 60-70% of Belgian, French, German and Italian insurers will not be ready until after 1 January 2014.
However, while almost 90% of respondents are on track to meet the 1 January 2015 deadline proposed by the European Commission, 34% of German, 17% of Italian and 13% of Spanish insurers do not think they will be ready to comply until after 1 January 2015.
Readiness for Pillar 1 is fairly consistent across Europe, with insurers in almost all countries saying they will meet most Pillar 1 requirements.
Readiness for Pillar 2 is more divided – insurers in the UK, Germany and the Netherlands are confident most requirements will be met, but the rest of the market is only on track to partially meet the requirements.
According to the survey, readiness for Pillar 3, however, is lagging, with 80% of respondents acknowledging they have made little progress to date in meeting these requirements.
Insurers in Britain, France and the Netherlands are relatively well prepared in comparison to others, but even in those markets, 60-70% of insurers have yet to meet most of the requirements for Pillar 3.
Martin Bradley, partner in financial services and global Solvency II lead at Ernst & Young, said: "We know from those organisations that have started their Pillar 3 projects, the emerging data deficiencies and significant process, control and IT challenges present an ambitious target to achieve within the current timeframes."
Only 17% of insurance companies have formally assessed their risk management systems and determined their effectiveness in relation to outcomes.
Bradley added: "There is a risk that respondents have overestimated their readiness for Pillar 2, perhaps by placing greater emphasis on the existence and nature of a component than on the effectiveness of their risk-management systems."
Nearly 69% of insurers say they have only met some or have not yet met any of the Solvency II data management requirements, while 81% are struggling in particular with data integration standards and their applications across group and external partners.
Jan Leiding, partner in financial services at Ernst & Young, said: "Making the data landscape work requires firms to integrate multiple complex IT systems and is a massive challenge.
"The survey shows that progress in implementing appropriate ownership, governance and controls is particularly slow.
"The shifting EIOPA deadlines have offered excuses, but these will be viewed as fundamental failings and now require prompt attention."
According to the survey, 70% of insurers plan to focus on a range of capital-optimisation strategies during 2013 and beyond.
Almost half of respondents are already working on asset matching and hedging strategies and counterparty credit risk management.
Bradley said: "Capital optimisation is too important for insurers to wait for either complete certainty in the rules or a full set of metrics to explore opportunities.
"Instead, they are engaging in activity where the impact is either relatively certain or where they see an opportunity to mitigate a negative impact of Solvency II."