Aon Benfield is advising Turkish insurers to take part in the European Union’s Solvency II protocol as high growth makes this is an ideal time for the country to embrace the regulation. Aon Benfield Analytics recently hosted its Solvency II conference in Istanbul to highlight the benefits and challenges of the non-EU country joining the regime, which is scheduled to incept in 2013.
Turkish insurers are currently regulated by Solvency I, which is over 40 years old and a simple factor-based approach. The country’s domestic regulator is keen for the insurers and reinsurers to sign up to Solvency II to bring the industry up to date and in line with the EU. Just 10 insurers piloted the Solvency II test scheme, QIS 4, in 2010, but most companies are planning to undertake the latest QIS 5, which will show how well prepared the country is for the new regulation. The Analytics conference attracted 40 insurer representatives, which is a clear testament to their commitment.
Speaking at the event, Marc Beckers, head of Aon Benfield Analytics for Europe, Middle East & Africa, said: “Solvency II is going to be a thorough and complex issue for both companies and regulators in Turkey. Insurers will reap the benefits of increased transparency and greater risk understanding but will need to dedicate time and resources to engage in a complex regime with challenging capital requirements.
“The Turkish insurance industry is in a high growth phase, so there is extra pressure to assess its risks in the most effective way. Solvency II is the next step in achieving this.”
Beckers also advised that a challenging part of the process will be the monitoring of catastrophic risks. The Turkish regulator acknowledged that they will need to decide who will design the catastrophe scenarios for Turkey and how to approach partial internal models to provide more realistic capital requirements than Solvency II’s Standard Formula.
In addition, bancassurance is a growing business sector in Turkey so these companies will need to review the risk/reward of addressing both the Solvency II and Basel III regulatory regimes.
Source : Aon Benfield Press Release
