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Insurance does not anticipate that Solvency Act provisions requiring up 140,000 million sector

Posted on October 16th, 2009 in insurance insurance

The Director General of Insurance and Pension Funds, Ricardo Lozano, no provision for the future Solvency Act requiring insurers to increase the level of 140,000 million euros in provisions, which have as a whole.

After intervening in a forum of the Spanish Association of Insurance Brokers (Adecose), Lozano said the provisions of the sector level “is ok” from the global point of view, but pointed to the possibility of changes in requirements provisions of the companies at the individual level.

“The quantitative aspects are reasonably well the qualitative aspects must be revised,” said when asked if insurance companies as a whole need more supplies in the wake of capital requirements with transposition of the European directive on Solvency II.

Lozano explains why the EU directive, which will probably be incorporated into the Spanish legal system and Oversight Act “places emphasis on improving risk management in analyzing the factors that affect the operational rather than the overall level of provisions.

The Solvency II directive, comparable to that of Basel II for banking, which provides the necessary capital each insurer must be based on their risk-taking and its internal control, enables institutions to opt for internal models for calculating or standard formulas.

“Not everything is quantitative aspects, if an industry has twice the capital is more likely to overcome the crisis, but capital should be profit, and you’re willing to put it is a shareholder and required his return,” he said.

Thus, he advocated finding a suitable balance between risk and return for shareholders to avoid going “in search of another industry” if the insurer raises more than necessary capital requirements at the expense of the shareholder.

INSURANCE GUARANTEE FUND.

In addition, Lozano praised the European Commission is working towards a proposal to establish a Guarantee Fund Insurance (FGS), by providing financial backing to policyholders in crisis situations.

This FGS would be similar to those that exist to ensure consumer deposits in financial institutions and be nurtured by a percentage surcharge on premiums that policyholders pay for the contracted coverage.

“Since many countries have highlighted the need for post-crisis protection mechanisms be established once the insured and the damage not only to avoid it,” said the CEO of Insurance.

In this regard, he recalled that this initiative replicated in part the operation of the Insurance Compensation Consortium (SCC) which establishes measures for improvement and alleviates the detrimental effects of bankruptcies of insurance companies on their customers.