Insurers are failing to engage with asset managers on Solvency II
- 87% of asset managers expect Solvency II to bring them closer to their insurance clients but most are still waiting to start a dialogue
- Costs will be passed back to insurers but no-one knows how or in what volume
London, 10 July 2012: Research by Ernst & Young shows that, even at this relatively late stage, a significant proportion of asset managers are not yet in dialogue with their insurance clients about Solvency II.
While over half of the 44 European asset managers surveyed have said they are being proactive in preparing for the regulations, they have not yet been contacted by their insurance clients. 54% of managers have been in dialogue with less than half of their insurance clients and 25% of respondents said more than 90% of their insurance clients had yet to engage with them on Solvency II planning and requirements. Twenty percent of respondents said that “engagement with insurers” is their biggest challenge.
Kieran Murray, Ernst & Young’s Solvency II Leader for Asset Management said: “It seems that managers are either waiting for their insurance clients to approach them with a wish list or are ploughing on ahead with their own Solvency II program without a full dialogue with their client base. Either way, dialogue between managers and the insurance industry will be crucial to creating workable Solvency II programmes and most insurers would benefit from upping their engagement to make sure they get what they need from managers.”
Asset Managers will be ready in time
A quarter of respondents will complete their program before January 2013 and just 15% think they will miss the deadline and complete after January 2014.
“In the basic sense of compliance, we are confident the majority of the industry will be ready in time, but many have not yet got their heads around what insurers will be looking for beyond data compliance and more engagement between the industries is needed if the transition to Solvency II is to be seamless,” added Kieran.
Final numbers remain uncertain but costs will be passed on
In a survey of the UK industry by Ernst & Young earlier this year, the majority of managers thought that the costs of Solvency II would exceed £1m ($1.5m), but now managers seem less clear about the costs they face, with 51% saying that the costs were uncertain.
Kieran said: “Solvency II preparation is becoming a significant overhead for managers, with internal staff being redeployed and external recruitment for solvency II related roles increasing. Due to the continuing uncertainty over the details of the legislation, firms haven’t yet really got a full picture of the client reporting and data management work they will need to undertake, but one thing is for sure, they are planning to pass the costs on.”
Just 14% of managers are not considering passing costs onto insurers. A quarter of managers are sure that they will pass on the cost for portfolio modelling and optimization, and that percentage is expected to grow in the coming months. Sixteen percent of managers say they will levy a one-off charge for these additional services and a similar proportion has agreed to increase fund or management charges.
“We would have expected there to be far more clarity in the plans for fund charges by now. The lack of consensus is in part down to managers not yet having discussed or agreed this with their insurance clients. The two industries need to start engaging on these details soon or one of them could end up out of pocket,” concluded Kieran.