Captives in Europe are still concerned by the "severe impact that will be felt" by Solvency II unless proportionality is embedded in the regime and allowances made for the likes of captives as well as monolines and mutuals. These insurance companies will be worst hit, warns Guenter Droese, chairman of the European Captive Insurance and Reinsurance Owners Association (ECIROA), writing in the FT.
Droese says: "These smaller and much less sophisticated companies cannot benefit from internal models in the same way as the larger insurers due to their size and the cost involved...
"Captive insurance provide important capacity for insuring the large group risks, which often is not available in the traditional insurance market. It is for this reason that they have to be recognised under the Solvency II process for what they are and there has to be a distinction made between the professional insurance companies and the smaller, but equally important, insurance companies dedicated to covering a specific need in the market."
He concludes by saying that the captive industry has been actively lobbying both the Committee of European Insurance Occupational Pensions Supervisors (CEIOPS) and the European Union "to plead for proportionality for these companies".
The notion of proportionality is becoming a more common theme/concern.
Stuart Bridges, chief financial officer at London firm Hiscox told InsuranceCapitalRisk last week that "there is a real need for proportionality in how Solvency II is implemented. The risk management framework
"The key thing is that the Financial Services Authority and other supervisors apply proportionality. That I think is the main challenge that needs to be looked at - we can't have a one-size-fits-all approach."