Louisa Renoux on the regulatory burden for mutuals

Louisa Renoux, head of Solvency II project at Mutualité Française

How has Solvency II changed the insurance industry?

Solvency II has had a strong impact on governance. While it brings transparency and it reinforces the role of the board and the risk function, it also comes with new rules and strong constraints. In particular, it introduces the four-eyes principle, which was interpreted as the need to have two persons to manage the company effectively. This is something very new for our members. Furthermore, Solvency II introduces a requirement to have independent key functions with limited flexibility, which is an issue when we are talking about SMEs with very few key persons. Finally, it puts the ORSA [own risk and solvency assessment] process at the heart of the business strategy. Firms had to invest in the education of board members to allow them to make decisions under this new approach.

The impact of pillar 1 requirements on the health insurance business is limited because we are well-capitalised. The standard formula does increase the level of required capital, but this is not a problem. Pillar 3 requirements have forced our members to spend time reviewing data quality, which is a good thing. But the reporting requirements remain a heavy burden, especially for SMEs. We wonder whether all the data required will be useful and to whom. Thanks to the preparation exercises, our members feel ready, although we have concerns about the actual impact of the changes.

If you could change one aspect of the regime, what would it be?

Clearly it would be to simplify it and put proportionality at the centre. We fought hard to demonstrate the appropriateness of the principle of proportionality. For us it is really important to try to simplify Solvency II and not to be bogged down by the technical specifications, as in the past three years.

How will you be celebrating the launch date of Solvency II?

We believe the implementation of the regulation will be an ongoing process and we expect changes, such as in the technical specifications, the reporting templates and the calibrations. Furthermore, we believe there will be further discussions around the long-term guarantees package, following their application. In France, the supervisor will also keep an eye on the Solvency I formula, as benchmark.

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