Solvency II Quantitative & Strategic Impact: The Tide is Going Out

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Solvency II will have a profound strategic impact on the insurance industry and will cause a reappraisal of traditional business models. Report Published by Celent and previously published by Oliver Wyman and Morgan Stanley.

London, UK, Oct. 14, 2010 – As the Solvency II deadline moves closer, and the framework itself becomes clearer, strategic implications for the industry come to the forefront. Solvency II will act as a catalyst for significant change with profound strategic impacts, as laid out in Oliver Wyman and Morgan Stanley’s latest research report, Solvency II Quantitative & Strategic Impact: The Tide is Going Out. The report applies the Solvency II framework to the industry overall and on individual business models.

As Solvency II exposes the industry’s economic risks, M&A opportunities will arise from the transparency of insurers’ balance sheets and the resulting identification of risky businesses from those with sustainable profit streams. Therefore, insurers’ need to shift their product mix and achieve business diversification, and balance sheet scale will drive M&A deals.

Based on the research, insurers’ management teams are likely to focus on restructuring the life insurance portfolio from a traditional model towards unit-linked and variable annuity-type products. Additionally, there will be a stronger focus on asset liability management (e.g., hedging, risk management, and reinsurance).

This report analyzes the profound strategic impact of Solvency II on the insurance industry and examines how insurers can adapt their corporate structures to benefit from Solvency Capital Requirements (SCR).

About Celent

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally experienced analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is part of Marsh & McLennan .