You will be aware that earlier in 2009 ARC launched an initiative to assess the impact of the forthcoming Solvency II directive.  A working party was formed from the firms and advisors that kindly volunteered to assist.  Since formation we have reviewed and responded to two sets of Consultation Papers issued by CEIOPS.  It is clear from the review of these CP’s that aside from an impact on capital requirements for run-off companies there is also a big question over the ability of smaller companies to find the resources to implement and comply with Solvency II reporting.  Requirements such as quarterly calculations of SCR could carry an unwelcome burden for companies already running on a tight cost base.

Representatives of the Working Party have met with the FSA and also Karel van Hulle, the EC Commissioner responsible for delivering Solvency II.  The Working Party has received positive feedback and has been asked to provide examples of the impact of the directive on run-off companies.  The FSA are specifically interested in any difference between the results of an ICA assessment versus QIS4.  We have an opportunity to assess the impact of the new directive and feedback comments and suggestions to the appropriate authorities for amendments or adjustments to be considered ahead of QIS5 later in 2010.

We would be very keen to talk to the run-off community to gather intelligence regarding the capital demands arising out of QIS4 compared to ICA.  We have a short window in which we can try and influence the impact of Solvency II on the run-off sector and we would greatly appreciate input from any companies who have been assessing the impact on their own books.  Please feel free to contact any of the ARC Directors.

Your assistance is greatly appreciated.