By Maximilian Clarke

After years of deliberation which has left the UK’s insurers in a perpetual state of confusion, the Financial Services Authority (FSA) has formally delayed implementation of the Solvency II directive.

Commenting on this latest delay and its likely effects on the insurance industry, is the insurance partner at ‘big four’ professional services firm, PricewaterhouseCoopers.

"Today's FSA announcement is helpful as it removes some of the distracting debate and formally assumes a year's delay in implementation to 2014,” said Jim Bichard. “Despite this, insurers will be keen for more detail from the FSA on the practical implications of complying with two parallel regimes in 2013.

"The FSA’s plan to extend the IMAP (internal model approval process) by over a year is likely to be met by disappointment from many insurers, especially those pushed to the back of the queue, when they have committed time and resources, including their best people, to progressing for a mid-2012 delivery.

"Insurers are likely to view the revised timetable differently depending on where they are positioned in the process. At one level, it is encouraging that the IMAP window start date remains the same, but the timetable extension risks some companies losing momentum and with little time for remediation.

"This will add to the industry’s concerns that any additional delays will add unnecessary costs as 'second tier' firms will have to rely increasingly on independent assurance that their model plans are fit for purpose, as indicated in May of this year.

"Given the fact that using an internal model versus the standard formula can generally produce significant capital savings, insurers will be concerned that they might be left waiting until well into 2013 to see if their model has been approved.

"The pushback on when standard models will be approved is also significant for the industry given the increase in firms who are looking to follow this route.

"Both these delays will leave little time for insurers to either make changes to their models and fully embed them in their businesses or make tailored adjustments to the standard formula before the 'go live' date."

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