Ef­fect of Sol­vency II on fi­nan­cial com­mu­ni­ca­tion in In­sur­ance

Malta Independent - - BUSINESS & FINANCE - The re­port is avail­able on the Mazars Malta web­site at the fol­low­ing link www.mazars.com.mt

Mazars, the in­te­grated and in­de­pen­dent in­ter­na­tional or­gan­i­sa­tion spe­cial­is­ing in au­dit, ac­coun­tancy, tax­a­tion, le­gal and con­sult­ing ser­vices, has pub­lished its an­nual study ded­i­cated to the fi­nan­cial com­mu­ni­ca­tion of in­sur­ance groups. This year’s study fo­cuses on the ef­fect which the then im­mi­nent in­tro­duc­tion of the Euro­pean Sol­vency II Di­rec­tive, in­tro­duced on 1 Jan­uary of this year, had on fi­nan­cial com­mu­ni­ca­tion dur­ing 2015.

Com­ment­ing on the re­port, An­thony At­tard, Man­ag­ing Part­ner at Mazars Malta, stated that “Over the years, fi­nan­cial com­mu­ni­ca­tion has be­come an es­sen­tial as­pect of pro­mot­ing the ac­tiv­i­ties of large groups, es­pe­cially for in­sur­ers, with their par­tic­u­lar busi­ness model. The ex­er­cise has par­tic­u­lar salience this year with the ar­rival of the Euro­pean Sol­vency II Di­rec­tive, in­tro­duc­ing far-reach­ing changes in the mat­ter of cap­i­tal re­quire­ments and risk man­age­ment. 2015 stood out as the year of prepa­ra­tion for the in­tro­duc­tion of Sol­vency II, which be­came manda­tory on 1 Jan­uary 2016, and this was re­flected in a sig­nif­i­cant in­crease in the vol­ume of dis­clo­sures pub­lished by in­sur­ance en­ti­ties on the ap­pli­ca­tion of the Di­rec­tive, in par­tic­u­lar on their fi­nan­cial sound­ness in this new en­vi­ron­ment, and hence on their cur­rent and fu­ture abil­ity to dis­trib­ute div­i­dends.”

With re­gard to the find­ings of the study, Mazars said that the in­tro­duc­tion of Sol­vency II has “en­hanced the fi­nan­cial com­mu­ni­ca­tion of in­sur­ers, both qual­i­ta­tively and quan­ti­ta­tively, while sev­eral groups have adapted well to the de­mands of the new reg­u­la­tory en­vi­ron­ment, no doubt due to ear­lier work aimed at de­vel­op­ing their in­ter­nal mod­els”. On the other hand, re­sults from the sur­vey showed that in­for­ma­tion on fu­ture prospects, cap­i­tal man­age­ment and the dis­tri­bu­tion of div­i­dends “could all be im­proved”. The study also pre­dicted that fi­nan­cial com­mu­ni­ca­tion “will doubt­less be en­riched dur­ing 2016”, with the ef­fec­tive date of the Sol­vency II Di­rec­tive, the first SFCR pub­li­ca­tions, and the full ma­tu­rity of Own Risk Sol­vency As­sess­ments (ORSA). Fi­nally, the au­thors of the re­port com­mented on the fu­ture of Em­bed­ded Value re­port­ing, pos­ing the is­sue of whether con­ver­gence with Sol­vency II would be so com­plete as to lead to the dis­ap­pear­ance of this in­di­ca­tor.

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