The approach of Solvency II has a classic sci-fi feel to it. The acronyms and the jargon that surround this looming, all powerful, levelling force are surely made for ’droids to drone on about.
The risk based regulatory regime overseen by faceless cadres in Brussels could easily be another Brave New World, ready to replace the more human dystopia that exists now.
And now that attention is being focused on the fifth quantitative impact study, QIS 5, an insurance remake of the cult sci-fi movie The Fifth Element is in pre-production.
Imagine the trailer (adopts deep, doom-laden voice): “It is the 21st century and the survival of all humanity rests on the shoulders of a handful of insurance company bosses, all of which were previously special forces operatives. Upon slowly accepting the significance of a mysterious force known only as the Framework Directive, the crack squad must solve the mystical puzzle of four ‘elements’ which are key to defending Earth from an impending attack of pure evil and destruction. But the question remains, can the fifth element, which conjugates the other four into life, be embraced…”
QIS 5 – the fifth element: does it really represent the crucial key to the industry deflecting the wickedness that is concentrated in Solvency II? People increasingly seem to think so. A reinsurance company boss recently told me that he is genuinely concerned that the industry risks sleepwalking through the last consultative stage of Solvency II and waking up in a very uncomfortable place.
He believes that the insurance industry is at a crucial stage in the Solvency II process because the European Commission’s fifth quantitative impact study is all about firms’ transition work into the new regime and the last chance for senior management to get an understanding of the impacts, and maybe inform the final calibrations.
The trouble is, because dedicating time and resources to it is expensive, many insurers and reinsurers are holding back. Many are making the right noises but taking a wait and see approach, he told me. In reality, they are in danger of missing the last chance to help shape the final Solvency II landscape.
And he’s not alone in this worry. The insurance industry’s equivalent of the Federated Army, the CEA, has called on all European insurers, both large and small, to take part in the European Commission’s fifth quantitative impact study.
CEA president Tommy Persson (played by Bruce Willis in the movie), says the insurance industry has always supported the Solvency II project. But he goes on to say that “QIS 5 is a unique opportunity for insurers to contribute to the finalisation of Solvency II, since its results will provide crucial information for Solvency II’s ultimate design and calibration”.
And as with all good sci-fi scenarios, time is running out.
The QIS 5 exercise will run between August and mid-November 2010, right through the busy conference season and renewals lead-in, with the results due in April 2011. The European Commission is due to present its proposals for the implementing measures in spring 2011. The Solvency II directive is due to be transposed into national legislation by 31 December 2012.
Will it be a happy ending? You decide.