Fitch ponders the fate of Solvency II

Many large insurers have taken the steps to prepare for Solvency II, the European Union’s new insurer solvency requirements to be implemented in 2009, Fitch Ratings says in a new report.Many rated insurers already hold capital in excess of current Solvency I requirements, and the rater does not anticipate having to make many ratings adjustments as a result of the new rules. However, the report goes on to say, there is still much work to be done in advance of the January, 2009 start date for Solvency II.Those with the most work may be in countries which only enforce the minimum requirements of Solvency I, such as France, while those who have already developed risk-based solvency requirements similar to Solvency II, such as the U.K. and Netherlands, may have a head start.Fitch says its own rating process is risk-based and thus already includes many of the factors included in Solvency II. However, Solvency II may identify additional risk requiring additional capital on the part of insurers.Fitch does point to the delays experienced thus far in moving the new solvency requirements forward, noting the importance of meeting the current schedule for implementation, “in order for the project to maintain momentum and credibility”.