Property/casualty insurers in Germany and the United Kingdom are ready to meet their requirements under Solvency II, the risk-based capital regulatory regime slated for introduction in Europe on Jan. 1 2013, according to a study by Bain & Co. and Towers Watson & Co.

According to the study, 8% of U.K. property/casualty insurers and no German property/casualty insurers had a solvency ratio of less than 100% under the European Insurance and Occupational Pensions Authority's fifth and latest quantitative impact study on Solvency II's effects.

This is despite the fact that capital requirements are set to rise by more than 200% across Europe under Solvency II, according to Bain and Towers Watson.

But insurers in other countries and sectors, such as life insurance, may struggle to meet their capital requirements under Solvency II, according to the study.

Half of nonlife insurers in Italy have solvency ratios of less than 100%, according to the study, which used publicly available data to simulate Solvency II's effects.

This was due largely to the product mix of many Italian insurers, which have a 50% share of the nation's auto insurance market in which fierce competition means the cost-to-premium ratio is about 110%, according to the study, “Solvency II: A Strategic and Cultural Challenge.”

The study examined the repercussions of Solvency II for major insurers in France, Germany, Italy and the United Kingdom.

‘Considerable weakness’

“Our analysis exposes considerable weaknesses in the solvency ratios and risk-adjusted profitability of European insurers under Solvency II,” Gunter Schwarz, a Dusseldorf, Germany-based partner at Bain and head of the company’s insurance practice for Europe, said in a statement.

The study found that 25% of German companies and 21% of U.K. companies had a solvency ratio of less than 100% based on QIS 5. This is largely because those markets have a large share of long-term annuity products, according to the statement.

In Germany, there often is a mismatch between the periods of insurance treaties and invested assets; this mismatch is less common in France, Italy and the United Kingdom, the study found.