Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
Despite rumors of a possible delay, the European Union will adhere to its implementation date for Solvency II, according to Carlos Montalvo, head of the European Union's insurance supervisory body.
"We are still sticking to January 2013," Montalvo said during an interview while attending the biennial conference of the Association of British Insurers.
"Changes are coming," said Montalvo, who is executive director of the European Insurance and Occupational Pensions Authority, better known as EIOPA. "Solvency II is almost here."
Solvency II will seek to create a uniform capital adequacy structure for insurers and reinsurers throughout the 27-member European Union. The goal of Solvency II is "competitiveness and financial stability," Montalvo said. It will bring "risk-based supervision, and it will enhance consumer protection, financial stability and competitiveness," he said.
Solvency II will be implemented in a way that provides a "transition from the current regime to the new regime," Montalvo said.
EIOPA draws its membership from the supervisory bodies in the EU member states. "Solvency II at the end will be good for them," Montalvo said. "So there is a good reason to be ready."
The goal of regulation is "competitiveness and financial stability," Montalvo said.
Montalvo noted that different EU member countries have taken different approaches to regulation. "I have seen them all," he said. "None of them have proved to be the perfect one. All have upsides and downsides. But all systems are workable. "
Montalvo said he is confident that the insurance industry across Europe will be ready for Solvency II, which he describes as "the main priority for CEOs and for the executives of European companies. That is good. That is positive."
As the implementation date nears, the uncertainties will grow, as will concern about the negatives. "There are challenges," Montalvo said. "There are risks. But there are opportunities and benefits."
Five years after Solvency II takes effect the European insurance industry is likely to benefit from better risk management, more transparency and an enhanced role for EIOPA, he said.
Clement Booth, chairman of Allianz UK, spoke in defense of the idea of Europe, against the background of what he said are doubts about the viability of the EU and the euro.
"Europe is worth fighting for," Booth told the delegates in the accent of his native South Africa. "It's to my mind a modern miracle since 1945."
The effective removal of national borders and the introduction of a single currency throughout much of the EU have brought sharp reductions in the costs of doing business, Booth said. "And the thought of this all disappearing is pretty horrible."
California's financial troubles have not brought calls in the United States for that state to be expelled from the union or for the dollar to be abolished, Booth noted.
Booth said the diversification of the insurance industry contributed to the sector's favorable performance during the financial crisis. Insurers continued to pay claims, he said.
"Insurance has been over many years the oil in the engine of industry, and we can help to drive the recovery in future," Booth said.
Booth quoted a German proverb: "'Fear makes the wolf bigger than he is.'"
Otto Thoresen, director general of the ABI, stressed the importance of "greater understanding and engagement" by the U.K. insurance industry with the EU. He said his conversations with CEOs, government ministers and regulators during his two and a half months in his job, convinced him that "everyone accepts that the new order involves significant regulatory direction from the EU."
Thoresen said he has spent time in Brussels getting to know key people and trying to understand "how well the industry is shaping up to the task of ensuring we have a strong European voice in the developing global agenda."
Thoresen called on the U.K. insurance industry to prepare itself for Solvency II and to consider the likely effects of the coming changes on the "political, regulatory and consumer landscape."
"The more cohesive we are as an industry the more effective we can be as a lobbying force in the U.K. and the EU," Thoresen told the delegates.
Booth called for stronger efforts to encourage insurers to keep their domiciles in the United Kingdom. He cited a move by some insurers to in recent years to "Bermuda, Switzerland and yes, even Ireland."
(By Robert O'Connor, London editor: Robert.OConnor@ambest.com)