Solvency II and Asterix the Gaul

Since the publication of my Solvency II report in April 2008, there have been a lot of discussions around the new set of prudential regulation currently in implementation in Europe. For instance, there is a wave of criticism coming from France, notably from major players on the market. According to Groupama, a few internationally diversified banks have nearly collapsed in the recent past, demonstrating that the Basel II regulation could not prevent even well-diversified institutions from experiencing solvency problems. Therefore, what happened to the banking sector with Basel II during the financial crisis should prompt a reconsideration of the whole set of regulation and approach of Solvency II.

More recently, a French association gathering mutual insurers called the “Réunion des organismes d’assurance mutuelle (Roam)” representing 7% of the French market (around 10 million insured) has launched a Web site called “stopsolvabilite2.com,” demonstrating that not only major French insurance players are worried about Solvency II and dubitative about the real benefits the new set of regulation can bring. Among others, what French insurers and mutual companies fear is that Solvency II could have potential negative consequences on future growth and consumers. They believe that consumers would not be more protected than they are today with the current solvency regulation, and that Solvency II also might trigger tariff increases and decrease the level of competition due to concentration or failure of companies.

These actions led by French insurance companies could trigger new rounds of discussions and delay the effective implementation of the Solvency II directive. There is a country in the middle of the European community that some insurance companies have decided to resist. This could be a new story of Asterix the Gaul.