Solvency II:
Capital resilience in uncertain times – June 2020


Insurance industry faces shifting risks - An early insight into Solvency II reporting across the UK and Ireland

LCP’s analysis of the early Solvency II disclosures of 50 insurers across the UK and Ireland, has found a big change in the risks which most concern the industry.

30% of insurers identified Brexit is a key risk, down from 60% last year, while climate change and cyber risk are both seen as rising priority areas. 52% see cyber security as a key risk, up from 46% last year, while 46% of firms cited climate change, significantly up from 18% last year. 

A key new risk for insurers is ‘unanticipated coverage’ where they find that they face claims for risks that they had previously believed to be not covered by their policies, particularly in light of the COVID-19 crisis. 

What’s inside:

  • Despite COVID-19 related uncertainty, over half of insurers (52%) did confirm they expected to continue to meet regulatory capital requirements. 48% either remained silent or said there was still too much uncertainty to confirm if they would be able to meet the requirements.
  • Insurers continue to be sufficiently capitalised with eligible own funds that are, on average, nearly double their Solvency Capital Requirement (SCR) at their 2019 year ends.
  • 85% firms mentioned COVID-19 and its possible impact on claims experience. However, only 37% gave further details around how they are managing this such as assessing their exposures by lines of business or providing commentary on the expected impacts.
  • 54% of firms mentioned the impact that market turmoil as a result of the pandemic is having on their investment holdings.

This analysis is a pre-cursor to our annual report on 100 of the top insurers across the UK and Ireland (due later this year). Here we have analysed the Solvency and Financial Condition Reports for 50 firms, most of which reported ahead of the PRA/CBI’s extended reporting deadlines. 

This analysis provides an interesting early view into how Covid-19 has shifted the insurance landscape. Concerns around the impact on claims experience and investments are rightly top of the agenda.

Cat Drummond, Partner in LCP’s Insurance Consulting team and co-author of the report

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How we can help

We help organisations to unlock business value from their Solvency II processes.

LCP InsurSight is an analytics and automated trend identification tool for general insurance companies.

We work with insurers to help them better understand and manage the risks they face and their capital requirements.

We provide an alternative, external view on the best estimate level of reserves for insurers and also help them understand the key drivers of variability around that best estimate.

We help our insurance clients to develop strong links between their strategy, capital management and risk management processes, improving their chances of business success.

Our business-focused approach to validation can help you be confident that your insurance models are robust, and that you are meeting regulatory requirements.