Prism rating tool says European insurers in a strong position to cope with regulatory challenges posed by Solvency II
European insurers are strongly-capitalised and well-positioned to cope with the regulatory challenges posed by Solvency II, according to results published today from Prism, Fitch’s global economic capital model.
Prism is now a component in Fitch's rating process.
Overall, European insurers appear well-capitalised, particularly the German non-life and UK life sectors. The German life market and the UK non-life market generated the lowest Prism scores on average. European insurers that achieved a 'AAA' Prism score for capital adequacy totalled 44%; 19% achieved a 'AA' score.
“Softening market conditions, volatile capital markets and a changing regulatory landscape may potentially have negative effects on capital adequacy.
Greg Carter, managing director of Fitch Ratings' EMEA Insurance Group
An insurer's Prism score reflects the extent to which its capital covers its level of risk. The score is stated in terms of a rating scale level, such as 'AAA' or 'BBB+'.
In Europe, the companies achieved Prism scores that were broadly consistent with Fitch's existing view of capital adequacy; therefore it said the introduction of Prism will not result in rating changes.
Greg Carter, managing director of Fitch Ratings' EMEA Insurance Group, said: "The high average Prism scores reflect the favourable market conditions and the development of enhanced risk practices over the past five years. However, softening market conditions, volatile capital markets and a changing regulatory landscape may potentially have negative effects on capital adequacy."
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