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Solvency II data deluge and groupthink will raise risk

Regulators may miss evidence showing firms pose a systemic risk because of the complexity of Solvency II rules, according to RSA head of public affairs Gary Duncan.

At the Reform conference in London last week, Duncan said evidence of systemic risk could be lost in the huge amounts of data submitted by firms.

He said: “There is a clear danger that while we submit these huge returns, somewhere there might be a firm with a big problem which could have systemic consequences but is anyone going to be able to find that in this morass of data?”

Duncan said under Solvency II, returns being sent to regulators will be far bigger than in the past.

He said: “Our annual compliance return to the regulator will go from being about half an inch thick to being about two feet high.”

Also speaking at the conference, Evening Standard business and finance commentator Anthony Hilton said Solvency II will introduce a systemic risk into the system which was not there before.

He said: “As I see it, Solvency II will introduce a standardisation and a groupthink into the industry which will encourage herding.

“Next time there is a problem, everybody in the industry will find they are similarly exposed and will react in the same way, creating the systemic problem diversity had meant was not a issue before.”


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