Munich Re welcomes agreement on Solvency II
There has been a breakthrough in Solvency II, with representatives from member states and the European Parliament reaching agreement on the remaining outstanding issues. This clears the way for adoption of the directive before the European Parliament election this summer, though the result is a compromise and differs in some aspects from the original European Commission proposal. It is now possible for the directive, which will introduce strictly risk-based supervision with consistent economic valuation of all risks incurred by insurance companies, to come into force in 2012 as planned.
As Thomas Blunck, member of the Board of Management of Munich Re, put it, "Any company that has not given much thought to Solvency II should do so now. Munich Re has been successfully managing its business along the lines of Solvency II principles for some time. The application of the principles to the entire insurance industry will make risk management in the sector more stable and bring it closer to economic reality, thus making it more effective. And reinsurance will gain in importance under Solvency II, as it is clearly an effective way of achieving risk-capital relief. Indeed, Munich Re’s Solvency Consulting Team has long been at work, advising clients on gearing up to Solvency II requirements and devising reinsurance solutions adapted to companies’ specific needs."
Joachim Oechslin, Munich Re’s Chief Risk Officer, commented, "We are very pleased that after such a long time a compromise has been reached on the last few outstanding issues, so that Solvency II can proceed. The importance of this step cannot be overestimated. Risk-based supervision is central to the development of the insurance industry, not least in difficult economic times. However, it is regrettable that group support, whereby parent companies of international groups could have issued capital guarantees to cover subsidiaries in other countries, will not be possible, as it would have reflected economic reality. We fully expect that this issue will be looked at again after three years as planned. We also do not believe that the special national rules on valuing equity risks in repurchase agreements are sustainable."
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