Crunch Time for Solvency II

Like a glacier making it’s way down an alpine valley, the speed at which the European Union’s Solvency II requirements is approaching may be deceiving.

New guidance notes from London-based Lloyds confirm that the clock is ticking for the company’s syndicates, who are expected to have an internal model which meets Solvency II standards so that Lloyd’s can submit its Solvency II internal model application in January 2012. But to do so, each of the firms managing agent must also demonstrate to Lloyd’s and in many cases the U.K.’s Financial Services Authority that a series of deadlines from March through December 2011 are consistently being met.

Mike Wilkinson, management consultant at Towers Watson says meeting the requirements will tax many agents’ existing resources.

“With seven parallel Lloyd’s work streams, each with overlapping and challenging deadlines, agents will need to ensure resources are highly focused on delivery but at the same time ensure that the complexities of Solvency II are fully understood and integrated into a coherent framework,” Wilkinson says. “In only eight months time, each syndicate will need to submit a full and robust Solvency Capital Requirement (SCR) on a Solvency II basis. But agents will also need to be careful not to shift their focus away entirely from the qualitative aspects as a robust SCR is as much about process, validation and integration into the business as it is the technical calculations. This will be crucial for internal model approval.”