|By Robert O'Connor|
|A.M. Best Company, Inc.|
Against a backdrop of deepening financial crisis in
At the conference,
Below is a transcript of the interview.
O'Connor: This is
Ms. Hunt, thank you for joining us.
Hunt: Thanks, Bob, great to be here.
O'Connor: How are things progressing towards Solvency II?
Hunt: There is progress. There is steady progress. If you look at the objectives of Solvency II, it's clearly about a risk-based framework and it's about policy on protection and insuring that insurers are adequately capitalized. Clearly it's being implemented against a backdrop of significant market uncertainty. We are making progress in what has been a decade-long journey, and it's really coming to its final implementing measures.
O'Connor: The uncertainty builds almost by the day. Where are things headed on that score?
Hunt: It's very difficult to say. Our internal view is that obviously the European principle and arena has started to deal with some of the questions around fiscal and monetary union. I wouldn't want to comment more broadly than that, but clearly insurers are intrinsically linked into the financial markets. Our customers are saving for their future. They're saving for protection of existing lifestyles. And so the financial market conditions are a matter of great interest for us as providers for this marketplace.
O'Connor: The industry, is it ready?
Hunt: The industry is certainly as ready as it can be at this stage. What we have is a series of draft legislations, a series of draft directives. There are a number of areas where there is no certainty about where the regulation is going to land.
One of the frustrations for the industry has been we have the systems up and running, we have large project teams in place, we are building internal models, we're preparing ourselves for the regulation when it's finalized, but in practice we need certainty and we need a period of time between that certainty being delivered and the actual implementation date.
O'Connor: How about relations between the industry and the regulators, both on the
Hunt: Relationships have been very constructive. If you look at the alignment of interests, it's in the interest of both the industry itself and in the interests of regulators to implement a regime that's risk based and has the interests of policyholders and customers in mind.
So we're aligned in terms of the principles and in terms of some of the details as to how best that can be implemented. That remains a matter of some discussions around this conference.
O'Connor: What about surprises so far in the process to you?
Hunt: Probably the length of time it's taken. I think when we set off down this journey probably a decade ago nobody would have expected to still be having these conversations in 2011.
O'Connor: When do you expect to see things finally in place and to your satisfaction?
Hunt: The current implementation process is that, from a supervisory perspective, it takes place on the 1st of January, 2013. And then from an overall sort of governance perspective, a regulatory perspective, it'll take place one year later. So the deadline has moved out one year in terms of the overall application of the framework.
O'Connor: And the benefits, what are the great benefits from this for the industry?
Hunt: Clearly for the industry itself it'll be around certainty. If we get to a position where we have answers to some of these questions, certainty in the types of assets we should be holding, the types of products that we may sell. And from the customer perspective, it's very much around insuring that the industry is in a position to maintain its promises.
Listen to the interview with
|Copyright:||(c) 2011 A.M. Best Company, Inc.|