The majority of European insurers are "not prepared" for Solvency II, according to new survey

A study of more than 350 insurers in various key markets across Europe, by management consultancy BearingPoint, found that most companies were focussing their preparations on the capital efficiency and risk management 'pillars' of the new regime. Only 16% were also prepared to deliver the required quarterly and annual reports to the respective European supervisory authorities under the Pillar 3 disclosure requirements.

"Reporting is still a low priority - so far, insurers have not fully recognised the added value of a Pillar 3 analysis," said BearingPoint's head of insurance, Patrick Maeder. "Especially with regard to data management, our experience shows that an early review of Pillar 3 requirements sufficiently reduces the time and effort needed to implement Solvency II in full."

The European Commission recently announced that the date by which the new regime must be integrated into national legal systems would be delayed until June 2013, with the rules due to take effect from January 2014. The European Parliament's Economic and Monetary Affairs Committee (ECON) approved further compromise measures in the Omnibus II Directive, which will implement the Solvency II standards for insurers, in March, which will require a new draft of the text to be produced. A plenary vote on this draft is due to take place at the European Parliament in September.

According to the BearingPoint data, around 40% of participating firms underestimate the complexity of the reporting requirements of the new regime. Firms will have to produce both a public Solvency and Financial Condition Report (SFCR) and a Regular Supervisory Report (RSR), which is a private report between a firm and its national regulator. In the UK this role is currently carried out by the Financial Services Authority (FSA), which will be replaced by a Prudential Regulatory Authority (PRA) when the new financial services regime comes into force from 2013.

On its website, the FSA said that Pillar 3 had a "key role" to play in enforcing the Solvency II regime, by ensuring greater transparency. "This fosters market discipline and is achieved by you giving us and the market information... we need this for effective, risk-based and proportionate supervision," the regulator said.

BearingPoint said that the combination of the two reports was an "enormous burden" for insurers, requiring not only the development of a suitable framework but also integrating that framework into the company's existing IT infrastructure. The majority of insurers would be likely to use a standard market solution rather than their own in-house framework.

"At the moment we can observe a trend in the market away from in-house developments towards standardised IT solutions for Pillar 3," Frank Meys of BearingPoint said. "The main reasons for this are risk mitigation and the lower cost of implementation and maintenance."

60% of the surveyed firms plan to decide on a suitable reporting package within the coming weeks and months, according to the BearingPoint data.