WASHINGTON—While a final date to implement the European Union's Solvency II regulatory regime is not yet certain, observers say U.S. insurers should be planning now to comply with the rules.

That's true even though the United States is not among the first group of non-E.U. countries—Bermuda, Japan and Switzerland—that will be considered for equivalence reviews. If the U.S. fails to achieve equivalence, there could be consequences on both sides of the Atlantic, experts say.

“The fundamental question for insurers based in the U.S. or any country outside of the E.U. is the equivalence process and standards,” said Dave Snyder, vp and associate general counsel, public policy, at the Washington-based American Insurance Assn. “We believe that the U.S. system, while different in detail, achieves a very high level of policyholder protection and that equivalence is warranted.”

In the United States, for example, the National Assn. of Insurance Commissioners is making adjustments to its solvency modernization initiative to incorporate portions of Solvency II, said Robert Gordon, Washington-based senior vp-policy development and research for the Property Casualty Insurers Assn. of America.

U.S. insurers should prepare by becoming educated and informed about regulatory trends and developments, said Mr. Gordon.

Among those developments, a key European Parliament committee recommended last week that full Solvency II implementation be delayed one year to 2014 (see story, page 21.)

Companies also are devising internal capital models at the individual company and group levels, he said. Some PCI members also have met with domestic and foreign regulators to talk about areas that Solvency II would address even before formal rules are issued, he said.

How much Solvency II will affect U.S. insurers varies, said Howard Mills, director and chief adviser of Deloitte Services L.P.'s insurance industry group in New York. U.S. insurers with overseas subsidiaries and operations will be affected more immediately than purely domestic companies, said Mr. Mills, a former New York insurance superintendent.

“That said, the entire industry is bracing for the impact of Solvency II,” Mr. Mills said. “A lot involves investments in (information technology) and having the infrastructure in place to deal with consequences of increased transparency, reporting and the like.”

U.S. insurers that have European arms or operations in countries outside of Europe “have been building their efforts quickly to make sure they can address Solvency II,” said Tom Hettinger, a director in Towers Watson & Co.'s Chicago office. These efforts run the “full gamut,” he said, and include qualitative efforts such as examining the risk process as well as devising models.

Some domestic U.S. insurers “are viewing this as something that will come in the marketplace no matter what,” Mr. Hettinger said. “We are working with companies that want to get their process in place,” such as conducting their own risk solvency assessment. But not everyone is doing so, he said.

“Insurers are all keeping an eye on it,” said the PCI's Mr. Gordon, a former senior counsel for the U.S. House Financial Services Committee. “Regulators are moving ahead aggressively even before the rules are done. But ultimately, insurers are waiting to see what the final standards and requirements will be before making wholesale changes.”

He added that Solvency II views sovereign debt more favorably than it does corporate bonds when regulators view insurer assets. “The irony is that we have several sovereigns that are not the best investments at moment,” said Mr. Gordon.

Looking ahead, the AIA's Mr. Snyder said the “next development will be the transition measures for third countries,” including the United States. He said it was important that the development of those measures be open to the U.S. government, U.S. insurers and for the new Federal Insurance Office to play a major role.

AIA is “very much engaged” with the European private sector, the European Commission, the U.S. government and the NAIC in “any discussions relating to transatlantic issues, this being the major one,” he said.

Failure to grant equivalence or imposition of unreasonable transition measures “could potentially harm transatlantic insurance commerce that would harm not only insurers but policyholders on both sides of the Atlantic,” said Mr. Snyder. “Our efforts are strongly directed toward constructive dialogue and an ultimate equivalence finding for the United States.”

Deloitte's Mr. Mills said insurers find the general regulatory uncertainty “particularly vexing.”

Regarding Solvency II, “the industry is left to wonder when will it really happen and what it will really be like,” he said.