Most European insurers don't need to raise capital for Solvency II: Moody's

LONDON—Most European insurers will not need to raise capital to meet Solvency II requirements, a review by Moody's Investors Service of the fifth quantitative impact study concludes.

The QIS5 results released by the European Insurance & Occupational Pensions Authority in March suggest that most insurers have capital at levels exceeding requirements under Solvency II's risk-based framework, scheduled for implementation in 2013, Moody's said in a report released Friday.

Dominic Simpson, a vp at Moody's and author of the report, said in a statement that the report confirms that “few of our rated insurers need to raise capital because of Solvency II implications.”

Nearly 70% of all European insurance and reinsurance companies that will fall under the scope of Solvency II participated in QIS5, according to Moody's.

Carefully interpret results

The report, “Solvency II-QIS5 Results Show Adequate Capital, but Cautious Interpretation Required,” notes that some of the QIS5 results should be carefully interpreted.

“The data had to be provided in a short time frame, which could compromise its quality. Also, the test was based on year-end 2009 information, and balance sheets could materially change by the introduction of Solvency II from 2013,” said Mr. Simpson.

Furthermore, QIS5 did not test risk-management requirements, “which for smaller, less sophisticated companies, could prove a greater stumbling block than meeting capital requirements,” said Mr. Simpson.

The Moody's report is at www.moodys.com.