Risk managers hold key to clarity on dividends

One of the challenges insurers and investors will face under the forthcoming Solvency II directive is the lack of an easy metric to track cash generation. Risk teams can help provide part of the solution. Rob Mannix reports

If absence truly makes the heart grow fonder, shareholders might come to think wistfully of a key metric under Solvency I that will be missing from insurance company reporting in Europe after January 1, 2016.

The metric in question, known as ‘free surplus', is used by investors to understand an insurer's ability to generate cash and therefore pay dividends. Because incoming Solvency II rules contain no similar measurement, analysts say investors will struggle to understand how much cash