Effect of Solvency II on financial communication in Insurance
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.