Long term guarantees versus short term guarantees

The longer the insurance guarantee, the more the profits for the insurer are hypothetical.
This is the reason, for example, why pension guarantees or construction risk guarantees are often underwritten by not-for-profit companies (mutuals, pension funds, National House Building Council (NHBC) etc...) who provide a real service to consumers.
The excessive penalisation Excessive penalisation = the need for a higher capital requirement for these risks than experience and a correct analysis would suggest. , without an objective reason, of the requirements for these long risks or any attempt to require them to hold assets that are inappropriate to their coverage Assets such as shares and property may appear to be risky in the short term, but over the long term they may be a good complement to bonds in order to cope effectively with different economic scenarios. , may lead to the disappearance of these actors and this would have considerable consequences for the people of Europe As has already been seen, major actors with diversified offers are capable of suddenly withdrawing from a market. The disappearance of specialised suppliers could lead to the complete disappearance of the insurance offer or to a brutal increase in prices. and would burden the politicians with a weighty responsibility.

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Economic instability

Encouraging companies to take out all of the margins that exist within the technical provisions in order to transfer them to the companies own funds, often via the P&L item Results of the year (therefore paying taxes and serving as bonuses and dividends for joint stock companies) run counter to the concerns expressed by the governments to stabilise the banking system.
Solvency II will increase the volatility of the insurance sector by alternating visions that are either too optimistic or too pessimistic through a more marked variation of own funds and of the results and by unduly worrying or reassuring all of the stakeholders (policyholders, supervisory authorities, shareholders, credit agencies, etc.).
Although insurers do cover risks that may be calculated by statistics, there still remains a degree of uncertainty. While risk that is statistically quantifiable is controllable since it may be demonstrated, uncertainty may be estimated through the assessment of economic, industrial and political, but rarely mathematical, elements, and is related to characteristics that are specific to the profession. This whole process takes place within the context of an on-going dialogue with the supervisory authorities.

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Regulatory capture

The regulatory authority’s ability to remain impartial is being eroded (since the regulator falls within the sphere of influence of the parties that are subject to regulation).
The complexity of the calculations which, in practice, do not allow for the stated degree of rigour, will make the assessment of the reality of the controls carried out by the authorities impossible and will introduce a risk for the policyholders and/or an unlevel playing field.

Michel Dupuydauby
President of ROAM
CEO of MACSF Group
Chief representative R.O.A.M.

Marie Hélène Kennedy
General Delegate of R.O.A.M.

Movie of FFSA seminar