Industry-specific environment
The European Commission’s Solvency II Directive continues to be of great significance to the insurance industry. Solvency II is intended to introduce European insurance regulation and a risk-based solvency system. The specifics are currently under consideration by various government bodies in consultation with the insurance industry. In 2010 European insurance and reinsurance undertakings were invited to participate in the fifth Solvency II Quantitative Impact Study (QIS 5), which was conducted from August to November. The findings are expected to be published in April 2011 by the European Insurance and Occupational Pensions Authority (EIOPA). The standards contained in the EU Solvency II Directive are to be implemented by the member states in national law by 2012.
The international insurance industry has overcome the repercussions of the financial market crisis relatively quickly. It demonstrated its ability to rebuild its capital base – which had been eroded by the crisis – in a relatively short space of time. The global reinsurance industry remained robust. It was able to absorb a large number of natural disasters, some of which resulted in substantial loss expenditures. One of the challenges facing reinsurers in the year under review, however, was softening rates against the backdrop of an adequate supply of reinsurance capacity. Overall, though, insurance undertakings fared well in the year under review and again proved to be a stabilising factor for the economy.
As part of the macroeconomic recovery, German insurers generated further growth in 2010 – with premium income expected to show a nominal increase of 4.7%. This growth was driven first and foremost by single-premium business in the life insurance sector. Owing to the specific business model operated by insurers and their essential function in the national economy, the insurance industry has been able to maintain a stable development in times of crisis.
In the United States the passing of the “Dodd-Frank Wall Street Reform and Consumer Protection Act” heralded a far-reaching overhaul of US financial regulation in response to the financial market crisis. This Act entails extensive changes for the financial services sector. Some changes are also of relevance to (re)insurers. For the first time an agency for insurance matters has been established on the federal level – the Federal Insurance Office. Regulatory responsibility will nevertheless remain with the individual US states.