ECONOMY

Local insurers in dire straits want easier rules

Greek insurance companies are seeking an easing of the criteria for calculating the solvency margin, which would be patterned on a model considered by the European Commission, in order to deal with the crisis which has plagued the sector. The Union of Greek Insurance Companies met with Deputy Development Minister Christos Theodorou last Friday to discuss the situation. Insurers briefed the minister on the serious condition and the stock market’s continual decline. Among the proposals submitted by the union, the principal recommendation was that the criteria used for calculating the solvency margin be made easier. The major European countries, such as Germany, have already adopted this measure, with other countries expecting to follow suit soon, as they adopt a similar proposal promoted by the European Commission. The principal matters brought up by Greek insurance companies are connected to the damage inflicted on their capital adequacy, thus requiring them to strengthen their capital with immediate effect. The insurers’ lack of solvency, however, poses a stumbling block. One solution to the problem would be to have a looser interpretation of issues related to the sector. The crux of insurers’ proposals is for a more moderate approach regarding the surplus value accruing from real estate, the evaluation of the stock portfolio, requirements related to future claims and rules on fixed assets, all of which have to be considered when calculating the solvency margin. Insurers’ requests are understandable in view of the pressure exerted by the market. Also, International Accounting Standards (IAS), which will be implemented next year, also call for a looser interpretation of requirements relating to real estate. Insurers are suggesting that real estate be evaluated according to its market value and not objective value, as is the case now. If this is accepted, it would benefit the major companies with substantial property holdings. In any case, IAS rules call for the formation of independent appraisers. Insurers want this ruling implemented earlier than planned. They also suggested that independent appraisers who already offer this service could be recruited to evaluate the market value of their property portfolio. On their stock portfolios, they proposed a new technical approach for valuing the assets. Instead of using the cost value or the current value, they suggest a mathematical average valid for the entire year. The insurers also proposed an increase in the percentage of equity in which they can invest, asking for it to double to 10 percent from the present 5 percent. They also suggested a looser approach toward provisions for future claims, especially future premiums. Instead of the current 10 percent, they want this to increase to 15 percent. On the issue of fixed assets, insurers have proposed that a portion of this be calculated as part of investments. For the sector, implementing these proposals this year is seen as urgent. Apart from the stock market slump, the sector also has to deal with this year’s third consecutive year of declining premiums. For the State, a selective implementation of IAS could serve as an excuse for it to approve these measures and thus help out insurers during a difficult time.